Biden’s Student Loan Forgiveness Explained

Good news for student loan borrowers! The Biden administration has a new plan called the Saving on Valuable Education (SAVE) Plan. It's designed to help a lot of borrowers with low and middle income by greatly reducing their monthly payments and making it easier to get loan forgiveness.

Key takeaways

• The Department of Education's SAVE plan could lower payments significantly for many borrowers
• Eligibility criteria for loan forgiveness still remains, despite the termination of the one-time forgiveness plan
• Payments resumed fall 2023, but deferment options are available

The new SAVE Plan

The SAVE Plan was created to make it easier for low to middle-income Learn moreborrowers to pay back their loans. Where traditional income-driven repayment plans require you to pay 10-20% of your discretionary income, starting July 2024, the SAVE plan will only require 5% for undergraduate loans (graduate loans will still be set at 10%).

In addition, your discretionary income under the SAVE plan is calculated as the difference between your annual income and 225% of the poverty line, rather than 150%. These changes lower the monthly payments you're expected to make. Finally, if you owe less than $12,000, you might get your loan forgiven after just 10 years of payments, instead of 20.

Navigating the SAVE Plan application

Applying for the SAVE plan is straightforward. You’ll need to submit the Department of Education’s income-driven repayment (IDR) plan application on the Federal Student Aid Website (studentaid.gov/idr).

Once you’ve applied for an IDR plan, you can select the SAVE plan specifically. According to the Department of Education, most people can complete the application in just 10 minutes - but make sure you have your ID and financial information on hand.

Your timeline for application submissions

Since repayments have already begun, there might be a line to get your application to SAVE processed, so make sure to put it in as soon as possible. Keep in mind that the application portal might have some testing phases, so if it's not available right away, don't worry. Just be persistent and try again.

State of the Loan Forgiveness Program after Supreme Court rejection

Following the Supreme Court's dismissal of President Biden's huge $430 billion debt relief proposal, the government's strategic pivot introduced the SAVE plan. The one-time forgiveness program would have offered up to $10,000 or $20,000 of relief, targeting lower-income borrowers. While this particular pathway is closed, the search for alternative solutions continues, with the Administration focusing on financial hardships.

Qualifying for student loan forgiveness

Even though the one-time forgiveness plan had a setback, there are still ways to get your loans forgiven. If you work in public service, such as teaching or nursing, and you've been making regular payments, you might qualify.

TuitionHero Tip

In addition, the SAVE plan allows you to get forgiveness after 20 years of payments. Check out TuitionHero's student loan guide for a full walkthrough of the SAVE Plan, which can help you make the most of loan repayment and forgiveness opportunities.

Loan forgiveness taxation

If you're wondering about taxes on forgiven student loans, here's the scoop. Because of the American Rescue Plan Act, forgiven loans, like those from Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness, don't get taxed federally. But starting in 2026, forgiven balances under Income-Driven Repayment (IDR) plans might be taxed as federal income.

Your next steps in loan management as payments resume

Starting from September 1, 2023, loans started adding interest again, and payments began again in October 2023. If you're facing challenges, like money or medical troubles, there are options to delay payments temporarily.

As the freeze on payments ends, figuring out the best way to repay becomes really important. TuitionHero has advice on refinancing student loans, giving you personalized choices to handle your debts well.

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Exploring other forgiveness programs

While the SAVE Plan is becoming a big part of federal student loan plans, don't forget about other forgiveness programs. Public Service Loan Forgiveness and Teacher Loan Forgiveness are still good options for people working in certain jobs. These programs show support for people who contribute to their communities through their work.

How to stay informed

If you want to stay in the know about loan forgiveness, listen up! Loan servicers will send you messages about your forgiveness progress. Pay attention to what they say so you're in the loop. If you're eligible for forgiveness, they'll clearly tell you how much is forgiven and when it happens.

Why trust TuitionHero

At TuitionHero, we simplify student finances with private loans, refinancing, scholarships, FAFSA help, and student credit card offers. Our goal is to make education affordable. We provide personalized advice to navigate the SAVE Plan and ease financial worries. Let us turn challenges into opportunities.

Frequently asked questions (FAQ)

What’s the difference between the SAVE Plan and other federal student loan repayment plans?

The SAVE Plan is an income-driven repayment plan that calculates monthly payments based on a borrower’s income and family size. It doesn’t take into consideration how much student loan debt is owed. Other federal student loan repayment plans, like the Standard Repayment Plan, calculate monthly payments based on the amount of student loan debt owed.

What happens if I’m already enrolled in an income-driven repayment plan?

If you are already enrolled in an income-driven repayment plan, you can switch to the SAVE Plan by submitting an application for income-driven repayment plans on the Federal Student Aid website.

What happens if I’m not eligible for the SAVE Plan?

If you’re not eligible for the SAVE Plan, you may want to consider other federal student loan repayment plans, like the Standard Repayment Plan, Graduated Repayment Plan, or Extended Repayment Plan. You can compare all the available repayment options and choose the best one for your specific situation using the loan simulator tool on the Federal Student Aid website.

Final thoughts

The SAVE plan is an amazing opportunity for people who borrowed money—it means lower monthly payments and faster loan forgiveness. TuitionHero is here to help you with extra support through our financial education services. When loan payments start again, and things change, it's good to stay informed and take action. If you need personalized help, check out our financial education services.

Source

• SAVE Plan
• Income-Driven Repayment (IDR) Plan Request
• Supreme Court kills Biden's student debt plan in a setback for millions of borrowers