The SAVE program reduces borrowers’ monthly payments by half, and allows many borrowers to make $0 monthly payments, according to a Department of Education news release.
. SAVE also ensures borrowers don’t accrue additional unpaid interest on their student loan balances.
Under the Biden administration’s SAVE program, borrowers with undergraduate loans will see their monthly payments drop from 10% of discretionary income to 5% of discretionary income. Relatedly, the program increases the amount of income that is considered non-discretionary, and also increases income exemption from 150% to 225% of the federal poverty line.
In addition, borrowers with original loan balances of $12,000 or less will have their balances forgiven after 10 years of payments, rather than the previous rule of 20 years. This specific reform will allow nearly all community college borrowers to be debt-free within 10 years, according to the release.
Another important part of the Biden administration’s SAVE program is the decision to not charge borrowers with unpaid monthly interest. Student loan borrowers will not see their balances grow due to interest as long as they make their monthly payments, even if that monthly payment is $0, according to the release.All student loan borrowers in repayment will be eligible to apply for and enroll in the Biden administration’s SAVE program.
The SAVE program will replace the existing Revised Pay as You Earn program, but borrowers who register or are already registered with REPAYE will be automatically enrolled in SAVE once it is implemented.
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