by Bria Overs
Some student loan borrowers enrolled in the Saving on a Valuable Education (SAVE) Plan will receive debt relief in February. This move comes more than five months after replacing the Revised Pay As You Earn (REPAYE) Plan and months ahead of schedule.
President Biden announced Friday that student loan forgiveness would start for borrowers on the SAVE Plan who have made 10 years of payments and originally took out $12,000 or less for an undergraduate or graduate degree. According to the press release, eligible borrowers will automatically have their debts canceled, with no action required on their part. This feature of the SAVE Plan was scheduled for July 1, 2024.
Additionally, for borrowers with more than $12,000, every $1,000 above the minimum adds a year of payments needed before receiving forgiveness. For example, if a borrower initially owed $14,000, they would need to be in repayment for at least 14 years. The Department of Education includes the more than three-year payment pause and repayment time determined by the payment count adjustment.
“I am proud that my Administration is implementing one of the most impactful provisions of the SAVE plan nearly six months ahead of schedule,” Biden said in a statement. “This action will particularly help community college borrowers, low-income borrowers, and those struggling to repay their loans. And, it’s part of our ongoing efforts to act as quickly as possible to give more borrowers breathing room so they can get out from under the burden of student loan debt, move on with their lives and pursue their dreams.”
The Biden-Harris administration reports that enrollment in the SAVE Plan has increased from 5.5 million to 6.9 million borrowers since November 2023. 2.8 million are new to Income-Driven Repayment (IDR) plans, and an estimated 700,000 switched from a different option.
One perk of the SAVE Plan is the opportunity to have a $0 monthly payment, which Friday’s announcement revealed around 3.9 million borrowers on the plan had.
“Beyond being the most affordable student loan repayment plan ever available, the Biden-Harris Administration designed the SAVE Plan to put community college students and other low-balance borrowers on a faster track to debt forgiveness than ever before,” said U.S. Secretary of Education Miguel Cardona in a statement.
Nearly half of Black borrowers said they were very likely to use IDRs, according to a November 2022 report from The Education Trust, a policy and research organization. And 33.7% of Black borrowers were enrolled in an IDR plan 12 months after completing their bachelor’s degree.
“Today’s announcement will help struggling borrowers who have been making loan payments for years, including many who never graduated from college,” said Under Secretary James Kvaal in a statement. “Giving borrowers with smaller loans a faster path to being debt free will help many borrowers avoid financial distress and have peace of mind.”