More than 4 million borrowers have enrolled in the SAVE Plan to pay back their student loans, according to a Tuesday release from the Department of Education.
The SAVE Plan is an income-driven repayment plan. Borrowers who make more than about $15 an hour and enroll in the plan are expected to save about $1,000 more a year compared to other income-based repayment options.
Borrowers who make less than the $15 an hour threshold won't have to make payments on their debt.
So long as borrowers make their monthly payments, they won't be charged additional interest on their outstanding principal.
"We have a lot of people out there that are really struggling with their student loans," said James Kvaal, U.S. undersecretary of education. "And this is not the situation it was a generation ago. People are borrowing more and they're more likely to borrow, and we're seeing impacts on homeownership, small business formation. So this isn't just a problem for more than 40 million Americans, but it's a problem for their families. It's a problem for their communities. And it's holding back our economy as a whole."
White House officially launches plan to lower student loan payments
The Biden administration officially launched the SAVE plan, which could save many borrowers about $2,000 a year in payments.
Under the new application process, the IRS can access borrower accounts directly, which means applicants won't have to renew or reapply for their payment plans every year.
"The new application is easy and quick. Most people only need about 10 minutes to complete it," said Federal Student Aid Chief Operating Officer Richard Cordray. "Borrowers can get their monthly payment calculated in real time, and they can choose to have their IDR application recertified automatically each year."
The Department of Education says it's invited almost 30 million borrowers to apply for repayment with the SAVE Plan.
More benefits are expected to start up in 2024, including further reduced payments for undergraduate loans, and a program to forgive remaining balances of $12,000 or less if borrowers make 10 years of payments.
Kvaal said more needs to be done to keep college affordable.
"We need to take a look at where these unaffordable loans are coming from," he said. "A lot of them come from for-profit colleges, and we're putting the finishing touches on a plan to hold for-profit colleges accountable for leaving people with unaffordable debts and taking away their eligibility to offer student loans if they don't fix their programs."
As to whether these changes to student loans will survive legal challenges, unlike a previous policy that would have forgiven up to $20,000 in federal student loans, the White House is confident these changes will stick.
"Congress gave us the authority to create repayment plans. It's one we've used several times in the past. So we think it's pretty clear cut that we have the ability to create the SAVE Plan," Kvaal said.
