Many former students were disappointed earlier this year when it was apparent that Joe Biden’s idea to establish student loan forgiveness would not be feasible. However, the US president has introduced an alternative initiative called the SAVE Plan Calculator to assist Americans who are dealing with student debt.
A new student loan repayment plan set to begin in August 2023 could bring help to federal student loan borrowers who must make payments in the autumn.
Saving on a Valuable Education (SAVE) is an income-driven repayment (IDR) plan that might reduce some borrowers’ student loan payments to zero, while others could save more than $1,000 per year when compared to other plans. With the average borrower expected to owing more than $200 per month after payments resume (according to Experian statistics), this new approach could help alleviate some of the pain associated with their loan debt.
What is Joe Biden’s SAVE Plan Calculator?
The SAVE Plan Calculator, formerly known as the Saving on a Valuable Education plan, is an income-driven repayment plan that offers to reduce federal student loan payments by up to half in certain circumstances.
“The SAVE Plan Calculator is an income-driven repayment (IDR) plan that calculates payments based on a borrower’s income and family size – not their loan balance – and forgives remaining balances after a certain number of years,” the administration said in a statement.
“The SAVE Plan Calculator will reduce many borrowers’ monthly payments to zero, SAVE other borrowers around $1,000 per year, keep balances from increasing due to unpaid interest, and bring more borrowers closer to forgiveness faster.”
The SAVE Plan Calculator expands on the efforts made by the Biden-Harris Administration to assist students and borrowers, including the cancellation of more than 116 billion dollars in student loan debt for 3.4 million Americans.
What you should know?
- The SAVE repayment plan is an income-driven repayment plan that allows student loan debtors to pay a monthly charge based on their earnings.
- Borrowers earning $15 per hour or less can obtain a $0 monthly payment with no interest under the SAVE plan.
- Visit studentaid.gov to apply for the SAVE plan.
How much will I pay each month?
Image source: studentaid.gov
Your monthly payment is calculated by the SAVE Plan depending on your income and family size. If you earn $32,800 or less per year (about $15 per hour), your monthly payment will be $0, and even if you earn more, you’ll save at least $1,000 per year compared to what you would have paid under the REPAYE Plan.
Borrowers on the SAVE Plan will have their undergraduate loan payments slashed in half starting next summer (from 10% to 5% of income exceeding 225% of the poverty line). Borrowers with undergraduate and graduate loans will pay a weighted average of 5% to 10% of their income based on the initial principal balances of the loans they took out to attend school.
What exactly is the SAVE income-based repayment plan?
Saving on a Valuable Education (SAVE Plan Calculator) permits federal student loan debtors to have a monthly student-loan payment based on their earnings. The SAVE plan is an updated version of the previous Revised Pay As You Earn (REPAYE) scheme.
The most significant change is how the SAVE Plan Calculator your discretionary income (the money left over after taxes and living expenses), which is used to determine your monthly bill. The method determines your monthly payment by subtracting your adjusted gross income from the amount of income considered 225% of the federal poverty threshold for your family size. It was formerly 150% of the federal poverty threshold, thus the rise to 225% makes more sense.
The first step in calculating federal student loan installments
It’s normal to be hesitant to contact your loan servicer, the firm that maintains track of and collects payments for your federal loans, according to Hall.
However, because they collect and record your payments, your federal loan servicer should be one of the first places you consult when determining repayment choices.
“I know loan servicers can be intimidating because they can feel like bill collectors — and many of them do — and I’m not saying they provide the best customer service in the world.” “However, they usually have all of the answers to your questions,” Hall remarked.
You should also register an account on studentaid.gov if you haven’t previously. You will be able to utilize resources here to learn about different repayment alternatives based on your circumstances, verify your eligibility for programs, and apply for repayment plans.
It can also calculate your monthly payment, payback period duration, and total interest paid throughout the life of your loan using various repayment plans.
According to Hall, employing the tools on studentaid.gov is beneficial.
How to Make an Application for the SAVE Loan Repayment Plan?
Before submitting an official application, you can watch a virtual demonstration that walks you through the steps at studentaid.gov/idr/application/demo/overview.
The online application is available in English and Spanish, with accessibility choices for borrowers with disabilities, and a print form is available at studentaid.gov/forms-library. The completed paper form must be mailed to your loan servicer.
You will need the following information to complete the application:
- Information on how to contact us.
- Size of the household and the number of dependents (if any).
- Loan information from the federal government. You can find this information on your studentaid.gov account and manually enter it, or the application can transmit it for you with your permission.
- Financial details. Salary, retirement plan, health-care bills, mortgage payments, and so forth.
Because all of the features will not be available until July 2024, it is too early to tell if the SAVE Plan Calculator is a success or not.
Your savings relative to other student loan payback schemes will also depend on your situation and degree of debt, although this policy is projected to help many former students.