A defeat at the Supreme Court isn’t completely derailing the Biden administration’s efforts to ease student loan debt for the nation’s 44 million student borrowers. On Friday, the administration pushed forward with $39 billion in automatic student loan forgiveness, affecting more than 800,000 borrowers.
To date, the administration has approved nearly $117 billion in student loan debt for 3.4 million borrowers. Despite those figures, there’s still more than $1.77 trillion in student loan debt in the United States, which is why the Biden administration is rolling out an additional plan to forgive even more debt.
“Today, we are taking another historic step by forgiving $39 billion in student loan debt for 804,000 borrowers who have been paying down their debts for 20 years or more and should qualify for relief. Instead, many were placed into forbearance by loan servicers in violation of the rules, and others did not get appropriate credit for their monthly payments,” Vice President Kamala Harris said in a statement, following the announcement on Friday.
“Last month, President Biden announced we are pursuing an alternative path to provide relief through the Higher Education Act, and we finalized our new income-driven repayment plan – which will cut monthly payments in half for undergraduate loans,” the statement added.
The alternative path Harris that referred to is the Saving on a Valuable Education (SAVE) plan—which is a new type of income-driven repayment plan administered through the Department of Education and created under the Higher Education Act. The plan replaces the Revised Pay as You Earn (REPAYE) plan, which is currently in effect. The SAVE plan will go fully into effect on July 1, 2024.
The SAVE plan was initially announced at the end of June after the Supreme Court cut down the administration’s broader loan forgiveness plan, and per a White House release, it will be “the most affordable repayment plan ever created.” Here’s what you need to know about it:
- Loan balances will be forgiven after 10 years rather than 20 for borrowers with original balances of $12,000 or less.
- Income exemption will increase to 225% of the poverty line from 150%, so single earners earning less than $32,800 per year will not owe payments (or $67,500 for a family of four in most states).
- Undergraduate borrowers will see a reduction in the amount of discretionary income they need to pay each month, from 10% to 5%.
- Borrowers won’t be charged unpaid monthly interest, meaning debt balances will not grow as long as borrowers continue to make monthly payments.
- All student borrowers with federally held loans are eligible to enroll in the plan starting this summer, and those enrolled in the REPAYE plan will be automatically enrolled into the SAVE plan when it's up and running.
And, for what it’s worth, the SAVE plan will cost less than the administration’s original forgiveness plan, at an estimated $230 billion (compared to $400 billion), according to the Congressional Budget Office.
Recognize your brand’s excellence by applying to this year’s Brands That Matter Awards before the final deadline, June 7.
Sign up for Brands That Matter notifications here.
