Student loan borrowers facing the resumpt🍎ion of payments on federally-held loans in October can now apply for a new kind ✨of repayment plan that offers lower monthly payments. 

What an Income-Driven Repayment Plan Means

The Department of Education (DOE) launched a that allows borrowers to enroll in the Saving on a Valuable Education (SAVE) plan, a new kind of income-driven repayment plan that offers lower monthly payments than previously-available IDR plans. The new application, which the DOE says takes about 10 minutes to complete, calculates borrowers’ payments based on household income and how many people are in their family.

The new IDR plan was 澳洲幸运5开奖号码历史查询:finalized last month as part of President Joe Biden’s efforts to provide relief for student loan borrowers who had been counting on having up to $20,000 of their loan balances forgiven before the Supreme Court 澳洲幸运5开奖号码历史查询:struck that plan down.

"The SAVE Plan is the most affordable student loan repayment plan ever created," a DOE spokesperson said in a statement. "This new plan is a critical step in delivering on President Biden’s commitment to supporting students and borrowers, and helping more American families get out from under the burden of student loan debt."

Typical borrowers who enroll in SAVE will save $1,000 a year compared to previous IDR plans, and 1 million low-income borrowers will be able to make “payments” of $0 while still getting credit toward having the remaining balances of their loans forgiven, according to the Department of Education. 

How the Plan Works

Just like in previous versions of income-driven repayment such as the REPAYE plan, which SAVE is replacin൲g, borrowers pay 10% of their discretionary income each month. After 20 years of repayment (25 years for graduate school loans), any remaining balance is forgiven. 

Crucially, “discretionary income” is defined differently, allowing﷽ borrowers to make smaller monthly payments. Only income above 225% of the federal poverty line in the new plan counts as discretionary income, up from 150% in the old REPAYE plan. 

For example, individual borrowers will only have to make payments on income over $32,805 and won’t owe payments at all if they earn less than that. For a family of four, that amount would be $67,500.

Another major change: if the payment is less than the interest on the loan that month, the Department of Education won’t charge the remaining interest. In other words, as long as a borrower is making payments, their loan balance won’t increase because of interest.

Lastly, in a change that could save money for people who make less than their spouses, married borrowers who file their taxes separately don’t have to include their spouse’s income when calculating their payments for the new SAVE plan.

What’s more, changes will go into effect next year, reducing payments even more, cutting required payments to 5% from 10% for undergraduate loans, and reducing the repayment time for 10 years for borrowers who took out $1ꦏ2,000 or less in loans. 

Website in Testing

The version of the website launched on Sunday will have new functions added to it and will get technical tweaks, and will eventually go fully live in August, the Department of Education said. People who enroll during the current testing, or "beta" period, won't have to resubmit their applications.

The new SAVE program comes with a major convenience upgrade from previous IDR plans: borrowers will have the option to have the DOE access IRS data and automatically re-certify their income. Missing annᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚual recertific꧃ation deadlines is a paperwork pitfall that has caused millions to lose progress toward forgiveness and incur extra interest payments each year, according to the DOE.

Update, July 31, 2023: This story has been updated to include comments from the Department of Education and additional information about the SAVE application website's beta testing period.