Biden Launches New Income-Based Student Loan Repayment Plan

CNN
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The Biden administration is launching a beta website for its new income-driven student loan repayment plan today, officials told CNN, allowing borrowers to begin submitting applications for the program as federal student loan payments to be resumed in October.

The SAVE, or Saving on a Valuable Education, plan was terminated after the Supreme Court knocked down Chairman Joe Biden‘s student debt forgiveness initiative in June. It marks a significant change to the federal student loan system that could lower monthly loan payments for some borrowers and reduce the amount they repay over the life of their loans.

“Part of the president’s overall commitment is to improve the student loan system and reduce the burden of student loan debt on American families,” said a senior administration official who first showed the beta site to CNN. “The SAVE plan is a big part of that. It’s important at this moment as borrowers get ready to return to repayment.”

Federal student loan borrowers can access the beta site at https://studentaid.gov/idr/. The sign-up process is estimated to take 10 minutes, and many sections can be auto-populated with information the government has on hand, including tax returns from the IRS, administration officials said.

“We will be able to show borrowers their exact monthly payment amount and allow them to choose the most affordable repayment plan for them,” an official said.

Borrowers only have to apply once, not annually as previous systems required, which officials said would make this plan “much easier to use.” Users will receive a confirmation email once the application is submitted, and the approval process, which can be tracked online, is expected to take a few weeks.

Those already enrolled in the federal government’s REPAYE, or Revised Pay As You Earn, income-driven repayment plan will automatically be switched to the new plan.

The full website launch will take place in August and applications submitted during the beta period will not need to be resubmitted. The beta period will allow the Department of Education to monitor the site’s performance in real time to identify any problems, and the site may be paused to make necessary updates, officials said.

The SAVE plan, which applies to current and future federal student loan borrowers, will determine payments based on income and family size, and some monthly payments will be as little as $0. The income threshold to qualify for $0 payments has been increased from 150% to 225% of federal poverty guidelines, which equates to an annual income of $32,805 for a single borrower or $67,500 for a family of four. The Department of Education estimates this means more than 1 million additional borrowers will qualify for $0 payments under the plan.

Some borrowers could have their payments cut in half when the program is in full effect next year and see their remaining debt canceled after making at least 10 years of payments, a significant change from previous plans.

With the new plan, unpaid interest will not accrue if a borrower makes their full monthly payments.

But the new plan comes at a cost to the federal government. Estimates of the program’s costs have varied depending on how many borrowers sign up for the new plan, but they range from $138 billion to $361 billion over 10 years. By comparison, Biden’s student loan forgiveness program was expected to cost about $400 billion.

The Education Department has created similar income-driven repayment plans in the past and has not faced a successful legal challenge, officials noted.

The launch of the beta site comes as borrowers are set to start making federal student loan payments again in October after a more than three-year hiatus due to the pandemic.

Since the Supreme Court struck down Biden’s effort to cancel up to $20,000 of student debt for millions of borrowers, the administration has taken a number of steps aimed at helping federal student loan borrowers in other ways.

Earlier this month announced the Ministry of Education that 804,000 borrowers will have their student loans erased — about $39 billion in debt — after fixes that more accurately count qualifying monthly payments under existing income-driven repayment plans.