This is the reason why our Student Loan Bill could drop by as much as $473 coming soon

President Joe Biden's new student loan plan could see the money borrowed shrink to make it easier for students to pay back.


Some students are about to be relieved of the weight of student loan payments, as the federal government has come up with a repayment plan known as the Saving on a Valuable Education (SAVE) plan. Introduced by President Biden, this plan will cause a drop in loan repayment for some student loan borrowers, making it the most affordable means of paying for federal student loans.

What is SAVE about?

The Saving on a Valuable Education (SAVE) plan is a new income-driven repayment plan scheduled to take effect from July 1, 2024. This declaration was made last summer by President Joe Biden, and according to the White House, about 8 million borrowers have already signed up for the SAVE plan so far.

The SAVE plan is almost like a replacement for the Revised Pay As You Earn (REPAYE) plan created for students by the U.S. Education department. This plan will provide student loan forgiveness for a duration of 20 to 25 years for undergraduates and graduate students respectively, provided such a student has met the requirements. This is in addition to the monthly payment which is based on a percentage of your discretionary income.

How does SAVE lower the Student Loan payment?

Here’s how the SAVE plan works;

The SAVE plan calculates your monthly loan payment based on a percentage of your discretionary income—that is, the difference between your gross income and 225% of the federal poverty level for your family size —compared to the old REPAYE plan of 150%. This will lead to lower payments compared to plans that consider your total income

For example, let’s say you’re a one-person household living in Florida with an annual income of $30,000. The poverty level for a household of one in your state is $15,060, and 225% of that guideline is $33,885. Since your annual income is less than $33,885, your discretionary income is less than $0, so your monthly payments on SAVE would be $0.

Also, a person who makes about $50,000 will have a monthly bill of $67 using the SAVE plan, compared to the $228 that was paid using the REPAYE plan.

The higher income earners are not left out as they also experience a drop in their loan payment. For instance, if you earn $125,000, instead of paying $853 with the old REPAYE plan, you will pay $380 per month—saving you $473.

The percentage of payment by students towards their undergraduate student debt each month has been slashed from 10% to 5%, and borrowers who got a loan lower than $12,000, in the last 10 years will receive loan forgiveness.

How to lower your Student Loan payments using SAVE

A reduced student bill is automatic; it reflects in your July bill once you enroll for the SAVE plan. However, to benefit from the SAVE plan, your general debt must be greater than one-third of your annual income. 

Are you an undergraduate or a graduate student? Apply for the SAVE plan here to potentially lower your student loan payments

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