The Biden administration has launched a beta application for its new repayment plan for federal student loan borrowers.
The Saving on a Valuable Education, or SAVE plan, is an income-driven repayment plan that may cut many borrowers’ previous monthly payments in half, and will leave some people with no monthly bill.
The U.S. Department of Education says borrowers can begin enrolling now in what it calls, “the most affordable repayment plan yet.”
How the SAVE student loan plan works
Instead of paying 10% of their discretionary income a month toward their undergraduate student debt under the previous Revised Pay As You Earn Repayment Plan, or REPAYE, plan, borrowers will eventually be required to pay just 5% of their discretionary income under the SAVE plan.
Those who make less than $15 an hour won’t need to make any payments under the new option, the Education Department says.
“The SAVE plan is very generous to borrowers, almost like a grant after the fact,” said higher education expert Mark Kantrowitz.
Some of these benefits of the SAVE plan, including the change from 10% of discretionary income to 5%, won’t fully go into effect until next summer because of the timeline of regulatory changes.
Still, the Education Department says borrowers who sign up for the plan this summer will have their application processed before student loan repayments resume in October.
Borrowers who sign up during the beta application period will not need to enroll again later, Kantrowitz said.
How to apply for SAVE, and what info you need
You can apply for SAVE directly on the Education Department website. Most borrowers finish the application for an income-driven repayment plan within 10 minutes, according to the administration.
You typically need to provide your federal student aid ID, contact and financial information.
More relief in the works as payments resume
Due to a Covid pandemic-era relief policy, student loan bills have been on pause since March 2020.
After the Supreme Court rejected President Joe Biden’s sweeping forgiveness plan, the president announced a series of other relief measures for borrowers. There will be a 12-month period after payments resume during which borrowers won’t face the harshest consequences of missing payments, including negative credit reports and collection activity.
Biden also said his administration would try to cancel student debt relying on a different law.