The Biden administration announced a campaign on Tuesday to get federal student loan borrowers to sign up for income-driven repayments.
While borrowers have been able to sign up for new income-driven repayment plans for several weeks, Tuesday was considered the official rollout by the Biden administration.
Federal student loan payments have been on hold since March 2020.
Interest on student loan payments begins in September with payments expected to resume in October, but many might find their payments to be lower than they were prior to the pandemic.
The website automatically imports income information from the Internal Revenue Service. A Scripps News reporter was able to import all of the needed information within five minutes. Those who apply for income-driven repayment plans will need to have their income re-certified yearly.
Feds say company used 'Biden Loan Forgiveness' to scam borrowers
Two companies are accused of taking advantage of the uncertainty in student loan debt forgiveness to scam borrowers.
The Department of Education is encouraging borrowers who might struggle with payments to explore its new income-driven repayment plans.
The Biden administration is calling it the "Saving on A Valuable Education (SAVE) plan."
“Starting today, millions of borrowers can reduce their monthly student loan bills by enrolling in the SAVE plan, the most affordable repayment plan in history,” said U.S. Secretary of Education Miguel Cardona. “The SAVE plan is another huge step forward in President Biden’s tireless efforts to fix the broken student loan system, reduce the burden of student debt on working families, and put borrowers first. SAVE isn’t just about helping borrowers today, it’s about creating a more affordable pathway for millions of aspiring students who dream of earning college degrees and achieving the American dream."
The White House has touted the new plans as a response to its failed attempt to forgive up to $20,000 in student loan debt among low and middle-income borrowers.
Previously, borrowers using income-driven repayment plans on undergraduate loans were expected to pay 10% of their discretionary income. Discretionary income was previously considered any dollar made above 150% of the poverty level.
Borrowers on edge as federal student loan payments are set to restart
The Department of Education estimates 43 million Americans owe a collective $1.6 trillion in federal student loan debt.
Now, borrowers with only undergraduate loans will be expected to pay 5% of their discretionary income. The amount considered discretionary income increased to 225% of the federal poverty level.
Previously, a borrower with undergraduate loans with a family of four with an income of $70,000 living in the continental U.S. would have been expected to pay about $2,500 a year — or $208 a month — in payments. Under the revised plan, that person would pay about $125 a year — or just over $10 per month — in student loan payments.
The Biden administration said that about 1 million low-income borrowers will now qualify for $0 payments. Officials estimate that a typical graduate of a four-year university will save about $2,000 a year under the plan.
The Department of Education has already reached out to 43 million borrowers and plans to contact 30 million more to invite them to use the new plan.
