Biden's new student loan payment plan is open. Here's how to register. (2023)

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The income-based SAVE program will reduce payments for millions of borrowers, with many more borrowers eligible for $0 payments.

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Biden's new student loan payment plan is open. Here's how to register. (1)

Get onTara Siegel Bernard

Borrowers succumbing to the stress of federal student loans have a new option to cut their payments, eventually cutting them in half.

On Tuesday, you can participate in the Biden administration's new means-tested repayment program, SAVE, which offers millions of borrowers a cheaper way to pay their monthly student loan bills.should take place again in OctoberAfter a three year break.

“Through the SAVE program, we make a commitment to every student,” Education Secretary Miguel Cardona said during a phone call with reporters Monday afternoon. “Your payments will be affordable. You will not be buried under mountains of interest or debt for life.

In the coming days, more than 30 million borrowers will be invited to sign up for the scheme, which was first introduced in January, with monthly repayments based on income and family size.

Unlike an earlier White House plan to cancel up to $20,000 in federal debt, which was rejected by the Supreme Court in June, the payment option will be a permanent part of the student loan facility and available to current and future borrowers. It also creates a new safety net by automatically enrolling certain borrowers in the SAVE program after they can no longer make their payments.

Borrowers looking to enroll in the SAVE (Saving for Quality Education) program should act quickly: Expect about four weeks to process your application, according to a senior education ministry official. By registering now, you can rest assured that your documents will be processed in a timely manner before the first payment is due, the officials added.

Borrowers won't get the full benefits of the program until next summer, as some features won't take effect immediately. Here's a summary of how the program works:

Who can benefit from the new installment plan?

Those with federal student or graduate student loans. Borrowers with student debt may receive lower repayments than graduate student borrowers.

Who is excluded?

parents who borrowed moneyUse a Parent PLUS loan to pay for a child's education and he or she cannot enroll in a new plan.

If parental borrowers are unable to repay, they often get only the most expensive loansrepayment based on incomeA program known as means-tested repayment requires borrowers to repay 20 percent of their discretionary income over a 25-year period; the rest is forgiven.

How does the new SAVE program work?

All means-tested repayment plans generally work the same way. The amount of benefits depends on your income and family size and is adjusted annually. After a certain number of years (usually 20) of monthly payments, the remaining balance is written off. (The remaining amount is taxable as income, but:temporary tax rulesBalances redeemed through 2025 are exempt from federal income tax. )

The SAVE program replaces the Revised Pay As You Earn (REPAYE) program and is more generous in several ways. First, this will reduce paymentsStudent grantsUp to 5% of discretionary income versus 10% for REPAYE (15% for other plans).

Graduated debt also qualifies, but borrowers pay 10% of their discretionary income on this portion. If you have both bachelor's and master's degree debt, your payments will be weighted accordingly.

The new rules also revise the payment formula to protect more income for basic needs, reducing the total payment. The change would also make more low-income workers eligible for $0 payments.

What is Discretionary Income?

After paying for basic necessities such as food and rent, all other income is considered discretionary;income-related repayment planBorrowers are required to pay a certain percentage of the discretionary income.

The SAVE program changes the payment formula to provide more income for basic needs, resulting in less free income and lower payments.

SAVE raises the guaranteed forgiveness income to 225 percent of the federal poverty level, which equates to about $15 per hour for a single borrower. If you earn less, you don't have to make monthly payments.

In other words, singles earning less than $32,805 per year pay $0 per month. The same goes for people in a family of four who earn less than $67,500. The Department of Education says this will help an additional million low-income borrowers qualify for zero payments.

Under the old REPAYE program, lower incomes were covered up to 150% of the federal poverty level.

Will the treatment of interest change?

Yes. This is one of the most attractive features of the new program. If a borrower's monthly payments are insufficient to cover the interest due, the Department of Education will cancel the outstanding portion.

In other words, if a borrower owes $50 a month in interest but only pays $30, the remaining $20 disappears once the repayment is made. Monthly interest is waived for those whose income is too low to pay.

This new rule will provide some relief to those who have made payments, but their balances have increased because they have not paid enough interest.


Is the plan effective immediately?

Three big oneselements of the planAvailable now, including more income from the amortization formula, reducing repayments to zero for more borrowers. There is also a new way to deal with unpaid interest. Finally, married borrowers who apply separately no longer need to include their spouse's income when calculating their monthly payment. (They would also be excluded from their spouse's family size.)

But other benefits — including a 10 to 5 percent reduction in discretionary student loan income — won't take effect until July.

When the program goes into effect next summer, many borrowers will see their monthly dollar bills drop by 40% compared to the REPAYE program. However, wages for the lowest earners could fall by 83%, while wages for the highest earners could only fall by 5%.

Has anything changed for borrowers with a small credit balance?

Yes, but this feature will go live next summer.

Microloan applicants (or those with an original balance of $12,000 or less) will make monthly payments for 10 years before cancellation, rather than the more typical 20-year repayment period of other income-based repayment plans. For every $1,000 you borrow over $12,000, you must add a year's worth of monthly payments before the balance is forgiven, up to a maximum of 20 or 25 years.

Is the new plan always the best option?

The SAVE program is expected to provide the lowest repayments for most borrowers and may be the best option for most borrowers. The loan simulator tool is located atStudent aid networkcan help you analyze which repayment plan best suits your situation and objectives.

As soon as you log in, your loan is automatically included in the calculation. (If you're short on cash, you can add other federal loans.) You can also compare the plans side-by-side: what the monthly and cumulative costs are over time, and whether any debts will be forgiven.

What about borrowers who defaulted before payments were suspended?

Borrowers who were in arrears (i.e. where payments were deferred for at least 270 days) prior to the suspension of paymentsA new beginningAs far as payments are concerned, they are considered current. This means they can sign up for SAVE or another repayment plan.

but they musttake some stepsDo this and do it before September 2024 to avoid long-term defaults.

The specific procedure is as follows: contact the education departmentdefault parsing group- continueTelephone,Online or by mail - and request a withdrawal of your Fresh Start loan. Default groups can also help you enroll in income-driven amortization plans, including SAVE.

The group will transfer your loan to a legitimate loan manager and remove the default value from your credit report.

"Their new hires then place them in the IDR program based on the minimum monthly payment plan they qualify for," said a spokesperson for the Ministry of Education. "For most borrowers, that's a savings."

Can overdue borrowers apply?

Borrowers who were in arrears on their monthly student loans before the suspension also get a fresh start and can enroll in the SAVE program just like any other borrower.

Going forward, borrowers who fail to make their payments within 75 days will automatically be enrolled in the SAVE program, provided they agree to release their federal tax information to the Department of Education. The policy will be implemented in July next year.

How to register?

You can register can see their payment amount before signing up. The entire process will take no more than 10 minutes, government officials said. After submitting your application, you can check the status of your application by visiting your account dashboard.

In the coming months, credit advisors will also be able to help borrowers record and "self-certify" their income without providing tax documents, says CFO Scott Buchanan, whether through the service provider's website or over the phone.Student loan alliance, an industrial trading group.

People who are already registered with REPAYE do not have to do anything - they will be automatically transferred to SAVE and their deposit amount will be adjusted. Also switch to SAVE from another means-tested installment plan without resetting the amortization clock.

More information about starting repayments can be found hereour guide.

What should I do if I try to enroll but my application is not processed on time and I can't make my first payment?

There's a leniency program in place, which means you don't owe anything during the next billing cycle.

Do I have to do anything to stay registered?

Your benefit amount is adjusted annually based on your income. Your income must be updated annually.

However, if you allow the Department of Education to obtain your income information through income (which you can now do during the registration process), you do not have to re-declare your income every year, as this is done automatically.

Tara Siegel BernardIncluding personal finances. Prior to joining The Times in 2008, she was an associate editor at personal finance website FiLife and a contributing editor at CNBC. She also worked for Dow Jones and is a regular contributor to The Wall Street Journal. More about Tara Siegel Bernard

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