In July, SAVE plan student loan payments may be reduced by 50%

The Latest in Student Loan Repayment

The Saving on a Valuable Education plan is a newly introduced income-driven repayment option for federal student loan borrowers, with upcoming changes to make it even more cost-effective.

Monthly payments under the SAVE plan are currently calculated at 10% of the borrower’s discretionary income, based on a specific formula outlined by the Department of Health and Human Services. However, starting in July, these payments will decrease to 5% of discretionary income for undergraduate debt holders already on the SAVE Plan.

Estimating Potential Savings

An example provided by the Education Department shows that a single undergraduate borrower earning $60,000 annually would currently owe $227 per month under the SAVE plan, as calculated by the ED. Come July, this payment would reduce to around $109 monthly.

If the monthly payment does not cover the accrued interest on the loans, the government will make up the difference. Additionally, borrowers could qualify for loan forgiveness after a period of consistent repayments under the SAVE plan.

All federal student loan borrowers with direct loans are eligible to apply for the SAVE plan through their loan servicer, with the option to use tools like the loan simulator to determine the best repayment approach.

The Significance of Lower Payments

Since loan payments resumed, many borrowers have faced challenges meeting their obligations. Survey data indicates that a significant portion of borrowers have had to make financial sacrifices to manage their student debt, such as reducing retirement savings.

Embold Research’s findings reveal that a considerable percentage of borrowers have not resumed payments post-pause due to financial strain. Knowledge gaps about available repayment options also contribute to missed payments among borrowers.

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Read More of this Story at – 2024-05-24 14:11:19

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