Thereâs a new student loan forgiveness plan: Hereâs how to apply
A new student loan forgiveness plan that could cut some borrower’s payments to zero has officially been launched, according to the White House.
The Saving on a Valuable Education, or SAVE Plan, calculates payments based on a borrower’s income and family size as opposed to their loan balances and forgives debt after a certain number of years.
The plan will cut many borrowers’ monthly payments to zero and will save other borrowers around $1,000 a year, according to a White House statement.
Some 20 million borrowers will benefit from the plan, which replaces the existing Revised Pay As You Earn, or REPAYE, plan. Borrowers who are currently on the REPAYE Plan will automatically get the benefits of the new SAVE Plan.
READ MORE: 22,000 student loan borrowers receiving $9 million in refunds: Do you qualify?
How will the plan impact borrowers?
The SAVE Plan decreases monthly payments by increasing the income exemption from 150% to 225% of the poverty line. For example, a single borrower earning $32,800 or less or a family of four earning $67,500 or less will not owe any loan payments. Borrowers earning more than these amounts will save at least $1,000 per year compared to current repayment plans.
The plan also eliminates 100% of the remaining interest for both subsidized and unsubsidized loans after scheduled payments are made. This means if you make monthly payments, your loan balance won’t grow due to unpaid interest. For example, if $50 in interest accumulates each month and you have a $30 payment, the remaining $20 would not be charged.
SAVE Plan also excludes spousal income for borrowers who are married and file separately.
How to apply for the SAVE Plan
You can apply for the SAVE Plan here.
Most people complete the application in 10 minutes or less. You can also save and continue the application later so you don’t have to complete it in a single session.
You will need a verified FSA ID, financial information, some of which you can consent to be supplied automatically, address, telephone number and email address and, if applicable, spouse’s information.
Not sure which plan you are currently on? You can check this here.