To qualify, borrowers must have made at least 10 years of repayments and be enrolled onto the government’s new Saving on a Valuable Education (SAVE) Plan.
“Borrowers enrolled in SAVE who are eligible for early forgiveness will have their debts canceled immediately starting next month, with no action on their part,” according to the recent statement by the Department of Education (DoE).
Helping community college borrowers
The majority of federal student loan borrowers in default originally borrowed $12,000 or less, according to the DoE.
In particular, this new wave of SAVE Plan relief — which is coming months ahead of schedule — is expected to help people who borrowed smaller amounts to attend community colleges. The DoE estimated the SAVE Plan will make 85% of future community college borrowers debt free within 10 years.
U.S. Under Secretary of Education, James Kvaal, said the action will “help struggling borrowers who have been making loan payments for years, including many who never graduated from college. Giving borrowers with smaller loans a faster path to being debt free will help many borrowers avoid financial distress and have peace of mind.”
The SAVE Plan
To help borrowers benefit from this debt relief, the Biden administration has launched an outreach and email campaign to encourage Americans to sign up for the SAVE Plan — especially those who may be eligible for immediate student loan forgiveness.
As of January, 6.9 million borrowers were enrolled in the SAVE Plan, which U.S. Secretary of Education, Miguel Cardona, deemed “the most affordable student loan repayment plan ever available.”
Of SAVE enrollees, 3.9 million have a $0 payment — because they are single borrowers earning less than $32,800 per year or a family of four making less than $67,500 — while borrowers who owe a payment are saving an estimated $117 a month (just over $1,400 a year) compared to their previous REPAYE Plans.
“With lower monthly payments, protection from runaway interest, and faster timelines to debt forgiveness, President Biden’s SAVE plan is not only benefiting millions of current borrowers but also providing the students of today and tomorrow with a more affordable pathway to college degrees and credentials,” Cardona added.
Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.
