New income-driven student loan repayment plan available to borrowers

The Department of Education released a beta website Monday for the Biden administration’s new income-driven student loan repayment plan, known as the Saving on a Valuable Education (SAVE) plan. 

“A beta version of the updated [income-driven repayment (IDR)] application is now available and includes the option to enroll in the new SAVE Plan — the most affordable repayment plan yet,” the department said on the site.

Previously, the administration had numerous IDR options for borrowers, which advocates have said led to a confusing system for borrowers.

The new SAVE plan will replace the Revised Pay As You Earn Repayment (REPAYE) plan, one of the most widely used of the four IDR options available to borrowers. The other three IDR plans will be phased out or limited by the department.

The SAVE plan will make three significant changes this year compared to the REPAYE option. The first raises the income exemption from 150 percent above the poverty line to 225 percent, meaning a single person earning less than $32,800 would have $0 monthly payments under the plan.

The plan also won’t allow unpaid interest to grow if a person is making their monthly student loan payments. Lastly, spousal income for borrowers who are married and file separately will not be included. 

The website — first reported by CNN — shows a demo of the application process, where some information, such as tax returns, can be automatically inserted due to information the government has on file for a borrower. 

“When fully live, millions of borrowers will be able to complete the new application in ten minutes or less and will never have to reapply,” a Department of Education official said. “The new IDR auto-recertification feature will prevent borrowers from the risk of missing their annual IDR recertification date, which has caused millions of borrowers each year to delay their time toward forgiveness and incur additional interest charges.”  

The website will fully launch in August after the department has time to assess the site’s performance during the beta launch. 

Those on the previous REPAYE IDR plan will be automatically enrolled in the new plan and do not need to use the launched application.

Other aspects of the SAVE program will be implemented next year, such as payments getting reduced from 10 percent to 5 percent of income above 225 percent of the poverty line for undergraduate loans. 

The SAVE plan, touted as the most generous IDR plan by the administration, is expected to cost between $150 billion to $350 billion per year, according to varying estimates.

The launch of the SAVE plan comes two months before borrowers end their three-year-long pause on student loan payments and begin President Biden’s “on-ramp” repayment system.

Under the system, interest will still accrue, but borrowers will not be penalized in other ways such as credit score ratings for not paying their student loan payments until September 2024.

Updated at 4:56 pm ET.