Introducing the SAVE Plan: Biden-Harris’s Breakthrough for Affordable Student Loan Repayment

Introducing the SAVE Plan: The Biden-Harris Administration believes that education beyond high school should open doors to opportunity rather than trapping borrowers in unaffordable debt. This is why President Biden and Vice President Harris have worked tirelessly since day one to repair the broken student loan system and make college more affordable. Today, the Biden-Harris Administration announced the official launch of the most affordable repayment plan ever conceived – the Saving on a Valuable Education (SAVE) plan – and launched a campaign to encourage eligible borrowers to enrol.

The SAVE plan is an income-driven repayment (IDR) plan that calculates payments based on a borrower’s income and family size – not their loan balance – and forgives outstanding balances after a specified number of years. The SAVE plan will reduce the monthly payments of many borrowers to zero, save other borrowers approximately $1,000 annually, prevent balances from growing due to delinquent interest, and bring more borrowers closer to loan forgiveness more quickly. The SAVE plan builds upon the measures already taken by the Biden-Harris Administration to assist students and borrowers, including the cancellation of more than $116 billion in student loan debt for 3.4 million Americans.

The Biden-Harris Administration estimates that more than twenty million borrowers could benefit from the SAVE programme. Today, borrowers can enrol by visiting StudentAid.gov/SAVE.

Introducing the SAVE Plan

In detail, the SAVE strategy will:

Half the installments on undergraduate loans. The percentage of discretionary income that undergraduate loan borrowers must pay back will be reduced from 10% to 5%. Those with undergraduate and graduate loans will pay between 5 and 10 percent of their income, based on the original principal balances of their loans, on average.

Bring the monthly loan payments of many borrowers to zero. The monthly payment amount for a borrower is based on their discretionary income, which is defined under the SAVE plan as the difference between their adjusted gross income (AGI) and 225% of the U.S. Department of Health and Human Services Poverty Guidelines for their family size. This means that a single creditor earning approximately $15 per hour will not be required to make monthly payments. Compared to other IDR plans, borrowers earning above this amount would save approximately $1,000 annually on their payments. The Department of Education estimates that one million additional low-income borrowers will be eligible for a $0 monthly payment. This will allow them to prioritise food, housing, and other basic necessities over loan payments.

Ensure that creditors’ balances never increase so long as they make their required payments on time. The Department of Education will cease charging any monthly interest that is not covered by the borrower’s SAVE plan payment. Consequently, the loans of debtors who pay what they owe under this plan will no longer grow due to unpaid interest. For example, if a borrower accrues $50 in interest each month and their payment under the new SAVE plan is $30 per month, the remaining $20 will not be charged as long as they continue to make their $30 monthly payment. The Department of Education estimates that 70% of borrowers on an IDR plan prior to the payment suspension would benefit from this modification. Coinciding with the introduction of the SAVE plan, the White House Council of Economic Advisers published a new blog post demonstrating how the income benefit of the SAVE plan could prevent a lower-income borrower’s balance from increasing by nearly 78% over a 20-year repayment period.

Provide early forgiveness for borrowers with modest balances. IDR plans require all borrowers, including those who only attended school for a single semester, to repay their loans for a minimum of 20 or 25 years prior to balance forgiveness. Under the SAVE plan, creditors whose initial principal balances were $12,000 or less will have their loans forgiven after 120 payments, or 10 years of repayment. To a maximum of 20 or 25 years, the plan adds an additional 12 payments (equivalent to 1 year of payments) for each additional $1,000 borrowed above that level. For example, if the original principal balance of a creditor is $14,000, the loan will be forgiven after 12 years. Prior payments (those made before 2024) and future payments will contribute towards these maximum forgiveness periods.

Low- and middle-income borrowers, community college students, and borrowers who work in public service will benefit significantly from the SAVE plan. The Department of Education estimates that the Revised Pay-As-You-Earn (REPAYE) plan will have the following effects on future cohorts of borrowers compared to the IDR plan:

The total amount owed per dollar borrowed will decrease by 40%. Those with the lowest projected lifetime earnings will see an 83% reduction in payments per dollar borrowed, while those with the highest earnings will only see a 5% reduction.

The average graduate of a four-year public university will save approximately $2,000 per year.

While pursuing Public Service Loan Forgiveness, a first-year teacher with a bachelor’s degree will see a two-third reduction in total payments, saving more than $17,000.

85% of community college borrowers will be debt-free within 10 years as a result of the plan’s early loan forgiveness for borrowers with modest balances.

Black, Hispanic, American Indian, and Alaska Native borrowers will see a median halving of their total lifetime payments per dollar borrowed.

Borrowers who are already enrolled in the REPAYE plan will be automatically enrolled in the SAVE plan, and their payments will be automatically adjusted.

The Education Department Launches an Outreach Campaign

To encourage borrowers to enrol in the new SAVE plan, the Department of Education is collaborating with grassroots organisations to initiate the “SAVE on Student Debt” outreach campaign. The campaign will leverage strategic partnerships across the public, private, and non-profit sectors to assist borrowers take full advantage of the SAVE plan’s benefits and to ensure borrowers are aware of other Department resources and debt forgiveness programmes. Together with Civic Nation, the National Association for the Advancement of Coloured People (NAACP), the National Urban League (NUL), Rise, the Student Debt Crisis Centre, UnidosUS, and Young Invincibles, the Department will lead this partnership.

The campaign will expand on the direct outreach currently being conducted by the Department of Education and Federal Student Aid to ensure that consumers are aware of the SAVE plan and other debt relief programmes. In the coming days, the Department will invite nearly 30 million borrowers to register for the SAVE plan by contacting them directly. The direct-to-borrower communication will emphasise that the new IDR application can be completed in less than 10 minutes.

The “SAVE on Student Debt” campaign and direct-to-borrower communications will also concentrate on enrolling those borrowers in SAVE who will benefit the most from the programme but who are typically the most difficult to reach. Significantly, the new SAVE plan reduces barriers that previously prevented higher enrollment rates of other IDR plans by streamlining repayment options, automatically enrolling delinquent borrowers who have given permission to access their tax information in the plan, and eliminating the need to recertify their income manually each year. This is part of the Department’s larger improvements to the student loan system and comprehensive outreach campaign to assist borrowers when the payment pause expires in the autumn.

Expanded Efforts to Provide Student Loan Borrowers Relief

The SAVE proposal is a continuation of broader efforts by the Biden-Harris administration to provide relief to student loan borrowers, fix problems with the student loan system, and make college more affordable. The Biden-Harris Administration has forgiven over $116 billion in student loan debt for more than 3.4 million Americans, including:

As a result of modifications to IDR plans, $39 billion will be allocated to 804,000 borrowers who have been in repayment for over 20 years but never received the relief they merited.

$45.7 billion for 662,000 government employees

$10.5 billion for 491,000 borrowers with a permanent and total disability; and

Nearly 1.3 million borrowers who were defrauded by their institutions, saw their schools abruptly close, or are covered by related court settlements will receive $22 billion.

The Administration has also achieved the largest increases in Pell Grants in over a decade to help families earning less than roughly $60,000 per year; fixed the Public Service Loan Forgiveness programme so borrowers who enter public service receive the debt relief to which they are entitled; is holding colleges accountable for leaving students with mountains of debt and few job prospects; and announced it is pursuing an alternative path to deliver debt relief to as many Americans as possible.

What Are Federal Student Loans? Everything You Need To Know

Senator Biden Video transcript for DTC SAVE Plan

My fellow Americans, you know that I am a firm believer in education beyond high school — and that it should be a ticket to the middle class, not a burden that burdens people for decades as they attempt to pay off their debt.

On my first day in office, I pledged to repair the problems with the existing student loan programme, which have harmed borrowers for far too long.

And I’m proud that we’re keeping our word. Regardless of the number of litigation, challenges, or roadblocks placed in our path by Republican elected officials or special interests, we’ve already approved over $116 billion in debt cancellation for 3,4 million Americans.

And I’m pleased to announce today the launch of a new programme dubbed the SAVE Plan. It is the most affordable plan ever for student loans.

Here is how it operates. To repay this loan, 10% of your discretionary income was required. After paying for food, shelter, and other essentials, this is the only remaining income you have.

Under my new proposal, this payment will be reduced to 5% of your disposable income.

This will save the average borrower approximately $1,000 per year. It will provide borrowers with a little more breathing room.

And if your annual income is below $30,000, your monthly payment will be $0 until it exceeds $30,000 annually.

So long as you pay what you owe under this plan, your loan balance will no longer increase due to outstanding interest.

Under the SAVE plan, monthly payments are based on a borrower’s income, not their loan balance.

And here is how to join the SAVE programme. Submit an application through StudentAid.gov/SAVE. It takes approximately 10 minutes to complete. And if you are eligible for the SAVE Plan, enrol now to reduce your monthly payments before they resume this autumn.