The topic of saving, saving, and saving may seem repetitive and even silly, but when it comes to student loans, every new option that appears that could forgive the crippling debts of millions of students in the United States is welcome, and creates a lot of expectations.
The income-based payment “Saving on a Valuable Education” (SAVE) initiative, introduced by the Biden-Harris administration last year, promises just that: a new opportunity to reduce monthly payments and avoid the accumulation of unpaid interest. This year, the SAVE plan is expanding to offer even more benefits to those struggling to keep their finances afloat.
The SAVE plan comes to replace the previous U.S. Department of Education’s REPAYE plan, offering a more affordable option for student loan borrowers. Starting in July, this expanded plan was intended to bring additional relief to eligible borrowers.
Biden Proposed the SAVE Plan: What Happens if Kamala Harris Gets to the White House?
The reduction in payments is welcome news for any borrower. Monthly payments will be reduced from 10% to 5% of discretionary income. For those with mixed undergraduate and graduate debt, the payment will be a weighted average between 5% and 10%, based on the original loan balances. This decrease will allow borrowers to adjust their monthly budgets, possibly allocating more funds to savings.
Not only that, but the new plan also speeds up the loan forgiveness process for thousands of qualifying students. Borrowers with an original debt of $12,000 or less could be eligible for forgiveness in just 10 years, compared to the 20 or 25 years required by other IDR plans. This acceleration significantly reduces the amount of accumulated interest and the total debt of borrowers.
Consolidate Student Debt Without Resetting the Clock With the SAVE Plan
Traditionally, consolidating student loans meant resetting the payment count to zero. However, under the new temporary rules, borrowers can consolidate their loans without losing progress toward forgiveness. Those who consolidate before September 2024 will keep their accumulated payment credits.
Borrowers who have deferred payments before July 1, 2024 will receive payment credits towards forgiveness. This also applies to those who enter periods of indulgence from that date. In this way, they will receive credit for payments during certain forbearance and deferral periods, maintaining their progress towards loan forgiveness.
Is Harris in Favor of Eliminating Billions in Student Loans Debts?
The truth is that Kamala Harris seems to be in favor of forgiving student debts to millions of severely indebted Americans, since she was part of the structuring of the project.
“President Biden and I know that far too many people in our nation are struggling with student loan debt. That is why we have forgiven nearly $144 billion for almost four million Americans while also creating the SAVE Plan so that millions of people can cut their payments in half or entirely,” said Vice President Harris in an official statement from March.
More than 7.7 million Federal student loan borrowers are enrolled in the SAVE Plan. This includes 4.5 million borrowers who have a monthly payment of $0 and over 1 million additional borrowers have a monthly payment less than $100.
Under the SAVE initiative, a single borrower who makes roughly $16 or less an hour will not have to make any payments. To date, more than 150,000 borrowers have also had their loans cancelled under the SAVE Plan.