Biden Administration Launches New Student Loan Forgiveness Plan

Biden Administration Launches New Student Loan Forgiveness Plan

© Noah Berger / Reuters

The Biden administration on Tuesday officially launched its new income-driven student loan repayment program designed to lower — and in some cases eliminate — monthly payments for more than 20 million borrowers.

Following a beta release three weeks ago, applications are now open for the Saving on a Valuable Education (SAVE) plan, available on the Federal Student Aid website. The plan is a replacement of sorts for a previous attempt by the Biden administration to eliminate as much as $20,000 in student loan debt for millions of borrowers — an effort that was shot down by the Supreme Court in June.

The launch comes just a few weeks before student loan repayments are set to begin again following a multi-year suspension during the Covid-19 pandemic.

Under the plan, borrowers who earn less than $15 an hour will not have to make any monthly payments, and the Department of Education estimates that 1 million borrowers could see their payments eliminated entirely. Millions of others will see savings of more than $1,000 a year compared to existing income-driven repayment programs.

“Monthly payments will be based on income, rather than their total student loan balance. In addition, as long as you make the monthly payments required under your plan, your loan balance will no longer grow because of unpaid interest – making sure that you make progress on paying down your debt,” Vice President Kamala Harris said in a statement.

Estimates of the cost of the plan vary widely. In March, the Congressional Budget Office said a similar plan would cost an estimated $230 billion over 10 years. The Committee for a Responsible Federal Budget estimates it will cost $276 billion, while the Penn Wharton Budget Model puts the cost at $475 billion over 10 years, though with room for considerable variation around that estimate.

In her statement, Harris noted that the Biden administration has already enacted more than $116 billion in debt cancellation, affecting 3.4 million Americans.