SAVE Plan Seems Like a Student Loan Winner

Biden Debt

            New Orleans     You have to hand it to the Biden bunch when it comes to student loans.  They don’t quit.  They get hammered by the Republicans.  The Supreme Court zaps them.  They get right back up off the mat and come back with a new proposal that will work for these borrowers.  It may not be total forgiveness, but looking under the hood, there’s no doubt that it is a big break for many.  Seems like Biden really wants the votes from these folks.

The so-called SAVE plan is in the process of rollout to 30 million borrowers.  Early birds get the worm, and it’s possible to go online and enroll now at in about 10 minutes, according to the government.  There’s an advantage in jumping on this now because processing will take some time, maybe a month, but that’s no guarantee, and payments are gearing up this fall.  Some features of the program don’t come together until next summer, but the three-year payment pause is absolutely history.

First the bad news.  Parents on the hook are still hanging.  Obviously, this plan is just for student loans financed by the feds, so it doesn’t do anything for personal or bank loans or other places students might have borrowed.

Now for the good news.  The new plan lowers the maximum payments to 5% of discretionary income from 10% for undergrads and 10% for graduate debt.  Discretionary income is what is left over after food, rent, and other essentials.  This plan includes more fixed items, shrinking somewhat the level of leftover money for the payment calculation.  An example given in the New York Times is illustrative:

SAVE increases the amount of income protected from repayment to 225% of the federal poverty guidelines, roughly equivalent to $15 an hour for a single borrower.  If you earn less than that, you won’t have to make a monthly payment.  Put another way, a single person who makes less than $32805 a year would make $0 monthly payments.  The same goes for someone in a household of four with income below $67000.  That should help an additional one million low-income borrowers qualify for a zero-dollar payment, the Education Department said.

Not bad, eh?  There’s some other sugar in this coffee.  Monthly interest that might remain on a minimum payment is forgiven and disappears, as long as someone in fact makes the monthly payment.  By next summer, payments are expected to drop by 40% and for lower income borrowers by up to 83%.

What else?  Borrowers in default get another bite at this apple.  Borrowers already on the REPAYE plan are automatically transferred to SAVE.  Delinquent borrowers also have another shot at getting right, and if they fall behind for 75 days are automatically going to be put in the SAVE plan.

This isn’t a giveaway, but it’s a big step forward.  Politics is politics, so none of this is to say Republicans won’t try to also block this, but people get ready, because now there may be a way to get an out from under the weight of student debt and get on with your lives before this comes out of your social security payments.