Biden administration rolls out new income-driven student loan repayment program

Students hoping to reduce or even eliminate their remaining student debt can now enroll online in the Biden administration’s new income-driven student loan repayment plan called Saving on a Valuable Education, or SAVE.

It may take some patience, though, because the website application containing the SAVE enrollment option — active as of this week — is still in the testing or beta phase.

“During the testing period, eligible borrowers can apply for the SAVE Plan, but some website functionality may be limited,” a Department of Education spokesman said Monday, adding that the department’s technical team would monitor the site and refine and tweak the application as needed.

The site is expected to be fully functional later in August.

The SAVE repayment plan has been touted by the Biden Administration as the most-affordable repayment so far, one that has potential to significantly reduce debt payments or even forgive outstanding balances.

It was announced by the White House on June 30, the same day the U.S. Supreme Court struck down the president’s loan forgiveness plan. It comes as loan payments for 43 million student borrowers are set to resume Oct. 1 after a pause implemented during the pandemic.

According to the U.S. Department of Education, the SAVE plan will:

• Reduce what undergraduate loans borrowers must pay monthly, from 10% to 5% of discretionary income.
• Increase what is considered nondiscretionary income protected from repayment. No monthly payment will be required of borrowers making below 225% of the federal poverty level, or roughly the equivalent of $15 an hour in minimum wage pay.
• Forgive loan balances after 10 years of payments, instead of 20 years, for borrowers with original loan balances of $12,000 or less.

The Education Department said that forgiveness aspect of SAVE has particular benefits for community college students, and it is estimated that most of them would be left debt-free within a decade.

Reacting to the plan, one college aid expert in Pennsylvania said Monday that he sees it as potential headway in an area that has not been at the top of discussion among legislators for decades.

“I think these opportunities are a significant step in the right direction for federal loan reform and simplification for current and future borrowers,” said Jamie Kosh, president of the Pennsylvania Association of Student Financial Aid Administrators.

The SAVE enrollment option can be found on a beta version of the updated Income-Driven Repayment application, part of the Education Department’s website.

Once fully live, millions of borrowers will be able to complete the new application in 10 minutes or less, the department predicted. They will not have to reapply, thanks to a new auto-recertification feature intended to prevent borrowers from missing their annual income-driven repayment recertification date.

Kosh pointed to attractive aspects of SAVE and related repayment system reforms.

“These new options will allow financially struggling students (and) families to lower, if not zero, monthly loan payments that will count toward forgiveness after listed terms are established. In addition, these plans allow for defaulted loan borrowers to get back into good standing with lower payments,” he said.

“We have many defaulted borrowers that have exhausted their options with little to no opportunity to establish good standing under prior terms,” Kosh added.

Meanwhile, officials have been urging students and their families to begin taking repayment steps to avoid a last-minute crush as the Oct. 1 deadline approaches. In late June, one aid administrator described the situation as unprecedented, one that could test the loan system’s capacity to assist borrowers with the process.

“We’ve never had a situation where 40 million people have to take an action to resume payment of their student loans,” said Bob Collins, vice president of financial aid with Western Governors University, a nonprofit, private online university based near Salt Lake City, Utah, that was founded by 19 Western governors.

Officials also are warning about scams.

Pennsylvania Higher Education Assistance Agency officials, including state Sen. Wayne Fontana, D-Brookline, the chairman of PHEAA’s board, recently advised families to be alert to student loan scammers. He said they will use social media, text messages, emails and phone calls, sometimes impersonating government officials or creating fraudulent websites.

In a related move, the Biden administration on July 18 released state-by-state data on $39 billion in Loan Forgiveness for 804,000 borrowers under a plan to make fixes to existing income-driven repayment plans. Among the problems, a number payments made were not properly counted toward loan forgiveness, for which those in repayment are eligible for after 20 to 25 years.

In Pennsylvania, the plan is projected to lead to loan discharges totaling $1.3 billion for nearly 30,000 students.

“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” U.S. Secretary of Education Miguel Cardona said in announcing the program fixes.