President Joe Biden and other administration officials are asking debtors to sign up for an income-driven repayment program that will allow them to earn expedited student loan forgiveness.
Biden’s new SAVE plan is an IDR alternative that offers affordable monthly payments according on income and family size. Borrowers enrolled in SAVE may be eligible for student loan forgiveness after 20 or 25 years of repayment, depending on whether they have student debt from a graduate program.
Last Monday, the Department of Education announced an early implementation of SAVE, allowing undergraduate borrowers with modest original balances to achieve loan forgiveness within 10 years. That incentive was originally scheduled to begin in July of next year, but it will now begin to help borrowers as early as next month.
Here’s what to know.
Fast-Track Student Loan Forgiveness Under SAVE
Borrowers with relatively low original sums can be fast-tracked for student debt cancellation under the new SAVE student loan forgiveness rule, which the Biden administration is implementing earlier than intended.
“Beginning in February 2024, the SAVE Plan will give borrowers who originally borrowed $12,000 or less forgiveness after as few as 10 years,” according to new Education Department instructions. Undergraduate borrowers with original sums ranging from $12,000 to $21,000 can have their loans erased in fewer than 20 years.
Typically, only time spent in an IDR plan, such as SAVE, can “count” toward a borrower’s student loan forgiveness period. Direct loan borrowers can get “credit” toward their IDR term for past repayment periods, including delay and forbearance, under a separate initiative known as the IDR Account Adjustment. The Covid-19 forbearance period also applies. Thus, even debtors who have not been in an IDR plan may be eligible for the fast-tracked student loan forgiveness provision. However, they must join in SAVE right away to be eligible.
“I encourage all borrowers who may be eligible for early debt cancellation to sign up for the SAVE plan at StudentAid.gov,” said President Biden on X on Tuesday. “Already, 6.9 million borrowers are enrolled in the plan, and 3.9 million have a $0 monthly payment.”
How To Qualify For Early Student Loan Forgiveness
To qualify for the accelerated student loan forgiveness benefits of SAVE, borrowers must meet several eligibility criteria:
- Only Direct federal student loans qualify for SAVE. Borrowers with non-Direct federal student loans, like Perkins loans or FFEL-program loans, may need to consider Direct loan consolidation in order to be eligible. “If some of your loans are not eligible for the SAVE Plan, then we encourage you to consolidate all of your loans into a Direct Consolidation Loan so that you can access the SAVE Plan,” says Education Department guidance. Direct loan consolidation for these borrowers may have the added benefit of allowing them to qualify for the IDR Account Adjustment.
- To qualify for student loan forgiveness on a 10-year term, borrowers must have had an original balance of $12,000 or less. “It does not matter if your outstanding balance is higher than what you originally borrowed,” clarified the Office of Federal Student Aid in a statement on X. For each additional $1,000 in the original loan amount, the loan forgiveness term increases by one year up to a 20-year maximum for undergraduate borrowers, or 25-year maximum for graduate school borrowers.
- Even though the IDR Account Adjustment can provide retroactive “credit” toward IDR loan forgiveness (even for borrowers not currently enrolled in an IDR plan), borrowers must specifically enroll in SAVE in order to qualify for accelerated forgiveness. As an initial step, it may make sense to first determine what your monthly payments would look like under SAVE by using the Education Department’s online loan simulator.
