The SAVE Plan offers lenient terms, allowing borrowers to avoid accumulating interest as long as they make regular payments.
The Biden administration’s proposed student loan repayment plan, known as the SAVE Plan, is gaining attention after the Supreme Court rejected the Biden plan
It also reduces monthly payments to $0 for many borrowers and cancels any remaining debt in as little as 10 years. Biden plan has emphasized the affordability of the plan, stating that the typical borrower will save $1,000 per month. However, Republicans argue that the Biden plan exceeds the president’s authority and is unfair to the majority of Americans without student loans.
The Congressional Budget Office estimates that the Biden plan could cost up to $361 billion, and opponents believe it may face legal challenges similar to those faced by the Biden plan. The SAVE Plan is intended to replace existing income-driven repayment plans and offers further reductions in monthly payments.
Some immediate changes include expanding eligibility for $0 payments for borrowers earning less than 225% of the federal poverty line
Additionally, interest will not accumulate if borrowers meet their adjusted monthly payment, even if it’s $0. Starting in July 2024, undergraduate loan payments will be capped at 5% of discretionary income, potentially halving monthly payments for many Americans.
Furthermore, the Biden plan offers a quicker path to loan forgiveness, with borrowers with initial balances of $12,000 or less having their remaining loans canceled after 10 years of payments. Critics argue that the Biden plan resembles free college and raises concerns about increased tuition costs.
While opponents question the legality of the Biden plan, the Biden administration finalized the rule this month. Conservatives believe it could be vulnerable to legal challenges if a plaintiff with standing emerges. Borrowers will be able to apply for the SAVE Plan later this summer, with some changes phased in over time.