WASHINGTON, D.C. — With student payments returning soon, the big thing is accruing interest starts back up this Friday for student loans. And if you’re hesitant about being able to afford the payments that start back up in October, you might want to consider signing up for President Biden’s SAVE Plan.
What makes the new SAVE Program any different than other Income-Driven Repayment Plans (IDR)? According to the Biden Administration, the SAVE Plan will cut payments on undergraduate loans in half compared to other IDR Plans, it will also prevent balances from growing because of unpaid interest if borrowers make their respective monthly payments. Under the SAVE Plan, the monthly payments are based on a borrower’s income, and not the student loan balance. Some of these benefits are underway now. Others will start next July.
As of now:
- Under the SAVE plan, a borrower who makes less than $30,000 annually will not have to make any monthly payments. And the plan would save borrowers who earn more than that at least $1,000 a year on payments.
- The Department of Education will also stop charging monthly interest not covered by the borrower’s payment on the SAVE Plan.
- Lastly, if you are married, you do not have to include your spouse’s information on your payment calculation if you are filing your taxes separately.
It’s important to note, the SAVE plan still has benefits that won’t go into effect until July of next year. Those benefits are:
- Payments will be cut in half for undergraduate-only borrowers. Payments on undergraduate loans will be reduced from 10 percent of income above 225% of the poverty line to 5% of income above that threshold.
- Borrowers could reach forgiveness sooner. Current IDR plans require 20 to 25 years of payments before forgiveness for the entire loan balance. Save borrowers with balances of $12,000 or less will receive forgiveness after 120 payments.
The SAVE plan is replacing the Revised Pay-As-You-Earn Plan. Borrowers who are already part of the REPAYE Plan will automatically be enrolled in the SAVE plan. If this is you, you’ll be able to see the payments adjusted in your account with no action needed on your part. You might also see the names SAVE and REPAYE used interchangeably.____
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