The Biden administration recently announced a plan to help around 3 million people with student loans. This plan comes after court rulings blocked parts of a student loan policy. The government will pause payments for many borrowers, similar to the break given during the pandemic, where no payments were required, and no interest accumulated.
What is the SAVE Plan?
The SAVE Plan is President Joe Biden’s main effort to make student debt more manageable. It is the most affordable plan for borrowers. However, two lawsuits led by Republicans have challenged this plan. Courts in Kansas and Missouri ruled that the Biden administration cannot proceed with parts of the SAVE Plan, affecting around 8 million people who use it.
Court Rulings Impact on Borrowers
The court rulings stopped the Department of Education from lowering borrowers’ payments from 10% to 5% of their discretionary income for those with undergraduate loans. They also blocked the cancellation of loans for people who have been paying small loan balances for over a decade. So far, 414,000 people have qualified for such debt relief.
Temporary Payment Pause
To address this situation, the Biden administration plans to pause payments for many borrowers for several months. During this time, borrowers won’t need to make payments, and no interest will build up on their loans. However, this pause won’t count towards debt relief programs like the Public Service Loan Forgiveness (PSLF) or other income-driven repayment plans.
SAVE Borrowers Already in Forbearance
Borrowers in the SAVE Plan were already placed in forbearance (a payment pause) for July to transition to the new payment calculation. If the court does not approve the federal government’s request, this forbearance will continue for the coming months. The payment pause will affect nearly half of the 8 million people in the SAVE Plan. About 4.5 million people with $0 payments due to low incomes will not be included in the pause.
Benefits of the SAVE Plan
Despite the setback, the Department of Education believes the SAVE Plan still offers strong benefits for borrowers. It provides the lowest monthly payment for most borrowers and prevents unpaid interest from growing as long as qualified borrowers make their monthly payments, even if that amount is $0.
Biden’s Efforts on Student Loan Debt
Biden’s attempts to cancel student loan debt have faced many challenges. His initial plan to cancel $10,000 to $20,000 in debt was overturned by the U.S. Supreme Court. Now, Biden is working on smaller, targeted debt relief efforts. These efforts have helped nearly 4.75 million borrowers. Most of the debt relief has come from fixes to programs like PSLF and income-driven repayment plans or targeting colleges that have defrauded students.
Future Plans for Debt Relief
The administration is working on a new plan to offer debt relief to about 30 million people. This plan will be more targeted and will look at factors like income, assets, and other debts. It will also consider whether borrowers received Pell Grants, which are for low-income students, and if they use other government support programs. This new plan is expected to face lawsuits but aims to avoid being overturned by courts.
The Biden administration’s pause on student loan payments is a temporary solution to recent court rulings. While the SAVE Plan faces challenges, efforts to provide debt relief continue. The administration is working on a new plan to help more borrowers in the future. Stay informed about these changes and how they might affect you.
1. What is the SAVE Plan?
The SAVE Plan is a new effort by President Joe Biden to make student debt more manageable by lowering monthly payments and preventing interest from growing.
2. How do the court rulings affect borrowers?
The court rulings stop the Department of Education from lowering payments and canceling loans for those paying small balances for over a decade.
3. What is the temporary payment pause?
The temporary payment pause means borrowers won’t have to make payments for several months, and no interest will build up on their loans during this time.
4. Who is affected by the payment pause?
The payment pause will affect nearly half of the 8 million people in the SAVE Plan, but about 4.5 million people with $0 payments due to low incomes will not be included.
5. What are Biden’s future plans for student loan debt relief?
Biden is working on a new plan to help about 30 million people, focusing on factors like income and assets, and aiming to avoid being overturned by courts.
