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Millions of Americans will see their student debt payments slashed beginning in July.
After President Joe Biden passed his new income-driven repayment plan, Saving on a Valuable Education (SAVE), at least 7.5 million Americans saw lower payments, the Education Department said.
“Just about every federal student loan borrower is eligible for the new SAVE plan,” attorney and Student Loan Sherpa founder Michael Lux told Newsweek. “Some borrowers will have to consolidate their loans to get eligible, so there may be some hoops to jump through, but in most cases, it is worth the effort.”
All payments will be determined for a year, and then they can change again depending on the loan holder’s income. And most importantly to many borrowers, after several years, many will be eligible for full student debt forgiveness.
That is the case for either 20 or 25 years of repayments, but Biden has also implemented early student aid forgiveness for some after 10 years.
Beginning July 1, however, even more help from the SAVE plan is coming for borrowers.
Those who have debt only for undergraduate loans could see their payment plan updated to be based on just 5 percent of discretionary instead of the prior 10 percent. If you have graduate school debt, however, the amount will stay at 10 percent, with those who have both somewhere in the middle of the two figures.
“When you combine the lower payments on SAVE with the generous SAVE subsidy and the earlier forgiveness provisions of SAVE, it becomes clear that SAVE is the best repayment plan for most federal borrowers,” Lux said.
Once the new rules come to fruition, borrowers under the SAVE plan making $70,000 would see payments of $310 go down to $155 monthly. That slashes the amount owed each month in half, giving borrowers a higher amount of spending money as they navigate inflation and economic uncertainty.