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Utahns with student loans could see $0 monthly payments under new SAVE Plan

The new plan is income-driven, and officials estimate it could lower monthly repayments for 20 million borrowers nationally.

More than 30,000 Utahns have enrolled in the Biden administration’s new student loan repayment plan since it launched two weeks ago, according to White House data released Tuesday.

The new “Saving on a Valuable Education” (SAVE) Plan aims to lower monthly student loan payments and could affect 20 million borrowers annually. It’s income-driven, meaning a borrower’s payback amount is based on their monthly income.

Max Richter, a Sugar House resident, said he saw his monthly payments drop from $380 to $145 after enrolling, saving him $235 a month.

“When SAVE became available, my current plan automatically converted,” Richter said. Though he was comfortable paying the original amount due, having the extra money each month “definitely helps,” he said.

How does the SAVE Plan work?

The pandemic-related pause on federal student loan payments comes to an end next month. At that time, more than 200,000 Utahns will need to resume payments for the first time in three years.

Under the new SAVE Plan, single borrowers who earn less than about $15 per hour will be exempt from making any federal student loan payments, while those with higher incomes could still see annual savings of over $1,000 compared to other income-driven repayment, officials said.

Each year, payment amounts will be reassessed based on income, which is derived directly from the Internal Revenue Service, so borrowers don’t need to recertify their income or reapply every year.

The SAVE Plan also ensures that borrowers never see their balance snowball due to unpaid interest — as long as they keep up with their payments. Any remaining balance after 20-25 years of payments will be forgiven, depending on the degree. And borrowers whose original principal balances were $12,000 or less be forgiven after 10 years of repayment.

How do I sign up for SAVE?

The application is available on the Federal Student Aid website. Applying will take most borrowers less than 10 minutes, and they will be able to see their new payment amount before signing up.

Most of the 4 million SAVE Plan enrollees so far, including Richter, were automatically migrated from a previous income-driven repayment plan (called “Revised Pay-As-You-Earn,” or REPAYE).

About 1 million of them have applied since SAVE enrollment launched in late July, federal education officials said during a Tuesday news conference.

Who is eligible for SAVE?

There are no income limits for SAVE eligibility, James Kvaal, under secretary of the Department of Education, said Tuesday.

Loans that are eligible include:

  • Direct Subsidized Loans

  • Direct Unsubsidized Loans

  • Direct PLUS Loans, made to graduate or professional students

  • Direct Consolidation Loans, with the exception of those that were used to consolidate Parent PLUS loans

Loans that must first be consolidated into a Direct Consolidation Loan to be eligible for repayment under the SAVE Plan include:

  • Subsidized Federal Stafford Loans (from the FFEL Program)

  • Unsubsidized Federal Stafford Loans (from the FFEL Program)

  • FFEL PLUS Loans, made to graduate or professional students

  • FFEL Consolidation Loans, with the exception of those that were used to consolidate Parent PLUS loans

  • Federal Perkins Loans

Loans that are ineligible for repayment under the SAVE Plan include:

  • Direct PLUS Loans made to parents

  • Direct Consolidation Loans that were used to consolidate Parent PLUS loans

  • FFEL PLUS Loans made to parents

  • FFEL Consolidation Loans that were used to consolidate Parent PLUS loans

  • Any loan that is currently in default

How does SAVE reduce monthly payments?

Income-driven repayment plans for federal undergraduate loans were previously calculated based on 10% of a borrower’s income, up to 150% above the U.S. poverty line.

The SAVE plan increases the income exemption to 225% above the poverty line. Next summer, SAVE is also set to calculate most repayment plans based on 5% of a borrowers income, instead of 10%.

Borrowers with both undergraduate and graduate loans will pay a weighted average of between 5% and 10% of their income, determined by the original terms of their loans.

The SAVE plan was introduced after the Supreme Court in June rejected President Joe Biden’s loan forgiveness plan. In the meantime, education officials said Tuesday they are pursuing alternative debt-relief options.

“Though the Supreme Court sided with Republican officials in striking down that plan earlier this year, we are pursuing another plan,” Bharat Ramamurti, deputy director of the National Economic Council, said.