On Your Side: What to know about new student loan repayment plan

Published: Aug. 23, 2023 at 5:49 PM CDT
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SPRINGFIELD, Mo. (KY3) - It’s a welcome relief to those worried about their student loan payments, which will return in the coming weeks.

You probably remember when the Supreme Court struck down President Joe Biden’s student loan forgiveness program this summer. Now, there’s a new plan.

It’s a significant change to the federal student loan system that impacts borrower’s monthly payments. The initiative is called SAVE. Saving on a Valuable Education is an income-driven repayment plan. Bills are tied to income and family size rather than the amount owed.

SAVE replaces the Revised Pay as You Earn (REPAYE) plan. It’s estimated this impacts about half of all borrowers. The plan is to protect more of your income. Borrowers who make roughly $15 per hour or less qualify for $0 payments. Those earning more might see their payments reduced by at least $1,000 annually. Remember, some haven’t made payments in years. Financial aid experts say that if that’s you, figure out what you owe.

“Some payment plans can be as low as zero dollars a month, but it’s important you contact your servicer. The worst thing you can do is ignore it and pretend it’s not happening because it’s happening,” said Becky Ahrens with Drury University.

You can apply for the SAVE plan right now using your StudentAid.gov account. SAVE also covers unpaid interest. So, balances don’t balloon as long as monthly payments are made on time. Once the plan is fully phased in next summer, some will see their debt canceled after making at least ten years of payments.

So far, the SAVE plan has had no major legal challenges, but that could change.

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