The Department of Education, along with the federal government, yesterday announced it had launched its updated income-driven repayment application tool for individuals with unpaid student loans, a tool that could help reduce the student loan payments for up to 30 million borrowers. The new initiative is called the Saving on A Valuable Education (SAVE) program.
The new tool is available on StudentAid.gov. Under the plan, individuals who are making less than $15 per hour will not have to make any payments on their student loans and those making more than that will save more than $1,000 per year compared to other income-driven repayment programs, according to the Department of Education. As long as individuals continue to make their payments, the balances on the unpaid debt will never increase because the payments are not covering the interest that is accruing on the debt. Individuals will also have their recertification automatically processed every year, instead of having to remember to do it on their own.
Borrowers who apply for the program early may even have it processed in time for the end of the student loan payment moratorium in October, according to the Department of Education. Among the benefits of the SAVE program are:
- More than 1 million additional low-income borrowers will qualify for a $0 payment.
- 70% of borrowers who were on IDR plan before the payment pause would stand to benefit from the SAVE plan’s new provision that borrowers who pay what they owe on this plan will no longer see their loans grow due to unpaid interest.
- Borrowers will see their total payments per dollar borrowed fall by 40%. Borrowers with the lowest projected lifetime earnings will see payments per dollar borrowed fall by 83%, while those in the top would only see a 5% reduction.
- A typical graduate of a four-year public university will save nearly $2,000 a year.
- A first-year teacher with a bachelor’s degree will see a two-third reduction in total payments, saving more than $17,000, while pursuing Public Service Loan Forgiveness.
- 85% of community college borrowers will be debt-free within 10 years.
- On average, Black, Hispanic, American Indian and Alaska Native borrowers will see their total lifetime payments per dollar borrowed cut in half.
