President Joe Biden has launched a new repayment program for Americans with student loan debt.
Student loan debt forgiveness was one of Biden’s key campaign promises during the 2020 presidential election.
“The Biden-Harris Administration believes that education beyond high school should unlock doors to opportunity, not leave borrowers stranded with debt they cannot afford,” said the White House in a press release on Aug. 22.
The SAVE plan will calculate borrowers’ payments based on income and family size rather than the balance of the loan. The administration aims to cut loan payments from 10% of a person’s discretionary income to 5%. After a certain number of years, the remaining debt will be forgiven.
The income-driven repayment plan “will cut many borrowers’ monthly payments to zero, will save other borrowers around $1,000 per year, will prevent balances from growing because of unpaid interest, and will get more borrowers closer to forgiveness faster.”
Borrowers who make less than $30,000 a year will not be required to make payments until their annual earning increases.
“Under the SAVE plan, borrowers whose original principal balances were $12,000 or less will receive forgiveness after 120 payments (the equivalent of 10 years in repayment),” stated the White House. “For each additional $1,000 borrowed above that level, the plan adds an additional 12 payments (equivalent of 1 year of payments) for up to a maximum of 20 or 25 years.”
The Biden administration states 20 million people with student loan debt will be impacted by the new plan, stressing the benefits for “low- and middle-income borrowers, community college students, and borrowers who work in public service.”
“You know I’m a firm believer in education beyond high school – and that should be a ticket to the middle class and not a burden that weighs people down for decades to come,” Biden said in a video message posted to X.
Biden said the SAVE plan will “give borrowers a little bit more breathing room.”
“As long as you pay what you owe under this plan, you’ll no longer see your loan balance grow because of unpaid interest,” said Biden. “I’ve said it before and I’ll say it again. As long as I’m president, my administration will never stop fighting to deliver relief to borrowers and bring the promise of college to more Americans.”
Since 2021, the Biden administration’s attempt to cancel $116 billion in student loan debt for 3.4 million borrowers across the country has faced legal challenges.
A bill blocking Biden’s plan to cancel up to $20,000 in debt for millions of borrowers was passed with bipartisan support by the Senate in June.
“The White House has argued that the proposal to cancel some student debt will help protect borrowers from defaulting when student loan payments resume later this year after a yearslong pandemic-related pause,” reports CNN. “But Republicans argue that the student loan forgiveness program is unlawful and shifts the cost of the debt to taxpayers who chose not to go to college or already paid off their student loans.”
Student loan debt in America exceeds $1 trillion in total.