Biden Administration proposes SAVE Plan

DELMARVA – The Biden administration now has a new plan in the works to give students some debt relief.

It’s called the SAVE Plan and aims to increase the income exemption from 150% to 225% of the poverty line meaning qualified borrowers would pay 0% of their income level. Mark Welsh with the UHY LLP says the Department of Education will no longer charge interest on that debt, meaning the debt will not grow, but that’s just one of 4 things the SAVE Plan is set out to do.

“The plan to eliminate 100% of remaining interest for both subsidized and unsubsidized loans after a scheduled payment is made under the SAVE Plan,” Mark Welsh said.

Also, this summer undergraduate loans will be cut in half, and borrowers with original principal balances of $12,000 or less will receive forgiveness.

More information from Mark Welsh:

Changes for this Summer:

• The SAVE Plan increases the income exemption from 150% to 225% of the poverty line.  Example:  A family of 4 would be $30,000 in 2023. So, the prior % was 150% of the FPL.  That meant for a family of 4 the amount was $45,000 and now it is $67,500 under SAVE.  If you are a family of 4 earning less than $67,500 would not need to make a monthly payment under this plan.  This means the Dept of Education will no longer charge interest on that debt, meaning the debt will not grow.
• The plan eliminates 100% of remaining interest for both subsidized and unsubsidized loans after a scheduled payment is made under the SAVE Plan. Example: If you make your monthly payment, your loan balance won’t grow due to unpaid interest. For example: If $50 in interest accumulates each month and you have a $30 payment, the remaining $20 would not be charged.

Changes for next Summer 2024:

• Payments on undergraduate loans will be cut in half (reduced from 10% to 5% of income above 225% of the poverty line). Borrowers who have undergraduate and graduate loans will pay a weighted average of between 5% and 10% of their income based upon the original principal balances of their loans.
• Borrowers with original principal balances of $12,000 or less will receive forgiveness of any remaining balance after making 10 years of payments, with the maximum repayment period before forgiveness rising by one year for every additional $1,000 borrowed. For example, if your original principal balance is $14,000, you will see forgiveness after 12 years. Payments made previously (before 2024) and those made going forward will both count toward these maximum forgiveness timeframes