Make Ends Meet: SAVE Plan reduces student loan payments based on income
LOUISVILLE, Ky. (WAVE) - If you owe on a federal student loan, that bill has once again come due after repeated layoffs over the last three years.
Interest started accumulating again in September for the first time in three years. Payments on federal student loans begin again on Oct. 1, 2023. The Department of Education says borrowers will get a bill, with payment amount and due date, at least 21 days before the date it is due.
Many Americans may have a tough time working that payment back into the budget.
Jennifer Finetti, Director of Outreach and advocacy for ScholarshipOwl, helps students and parents navigate through what can be high dollar signs when they are looking at their prospects for a higher education. Finetti now has good news when it comes to paying back the loans you may have from getting that college degree.
“The Biden Administration’s new SAVE Plan is really going to be a game changer for so many borrowers,” Finetti said.
The Saving on Valuable Education, or SAVE plan, is an income-driven repayment plan designed to help borrowers reduce their monthly payments and limit how much interest can add up over time.
“When it’s fully implemented, students will be able to limit their payment to no more than 5% of their discretionary income,” Finetti said. “Currently the income-driven repayment plan is limited to 10% of their discretionary income, so this will cut payments by 50%. Some students, depending on how much income they have, may be even able to qualify for a zero-dollar payment.”
Borrowers end up reducing the amount they must pay back in the end.
“Their balance will not grow with interest as long as their payments are made on time,” Finetti said. “This is different than all other repayment plans.”
The greatest benefit for borrowers on the SAVE Plan is the way discretionary income is determined when calculating the borrower’s monthly payment. The federal poverty guideline is bumped up to 225%, from the current 150%. That means you will not owe loan payments if you are a single borrower earning $32,800 or less or a family of four earning $67,500 or less.
Amounts are higher in Alaska and Hawaii.
”Anyone who has undergraduate federal student debt should apply for the SAVE plan,” Finetti said. “Most of them will qualify if not all of them.”
Log into https://studentaid.gov/ and go to your “My Aid” page. Scroll down and view your loans. Check to make sure your loan servicer has all your correct contact information. You may notice a change in the company that services your loan. There were many changes over the course of the pandemic payment layoff.
If you were in the REPAY Plan, you were automatically enrolled in the SAVE Plan. If you want to apply for the SAVE plan it generally takes about 10 minutes. Applications take about four weeks to process.
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