Nearly 5.5 million borrowers have applied for the newest federal program for student loan debt relief since it was announced about three months ago. Nearly 3 million borrowers who enrolled in the Saving on a Valuable Education (SAVE) Plan completely eliminated their monthly loan payments.
“Under President Biden, the Department created the SAVE Plan so that young people and working families can climb the economic ladder without unaffordable student loan debt weighing them down,” said U.S. Secretary of Education Miguel Cardona. “I’m thrilled to see that in less than three months, nearly 5.5 million Americans in every community across the country are taking advantage of the SAVE Plan’s many benefits, from lower monthly payments to protection from runaway student loan interest.”
The bulk of these loan savings benefit students with the greatest financial need – those eligible for federal Pell grants – including Black, Latino, Native American and Alaskan Native borrowers. Most SAVE borrowers will see their lifetime loan repayments cut in half.
As long as SAVE participants maintain their regular payments, their loan balances will go down due to the Education Department no longer charging interest.
Further, the SAVE program creates lower payment rates for both undergraduate and graduate loans. Required payments for undergraduate loans will be cut in half to five percent from the previous 10 percent. Borrowers who incurred both undergraduate and graduate loans, under SAFE, will now pay a weighted average of the original principal balances on their loans. The payment range for the combination borrowers is from 5-10 percent of income.
The $0 payment remains available for borrowers who earn less than $32,800 per year or those in a family of four making less than $67,000. Borrowers earning more than these annual amounts also benefit with an estimated savings of $102 a month ($1,224 a year), compared to earlier income-driven repayment programs. Geographically, every state and congressional district has SAVE participants. California and Texas each have more than 450,000 borrowers enrolled in SAVE, while congressional districts in Missouri, Ohio, and Michigan have the highest identified enrollment. Additional data can be found here.
Consumer advocates are emphasizing the program’s targeted reach.
For example, this October, the Urban Institute, a nonpartisan research and policy organization noted, “Payment reductions and larger loan forgiveness benefits under the SAVE plan will occur broadly across racial and ethnic groups but are skewed toward programs enrolling more Black and Hispanic students.”
Even earlier this year, the Center for Responsible Lending (CRL) stressed to the House Subcommittee on Higher Education and Workforce Development how the escalating costs of higher education surpassed the financial capabilities of many Americans.
“Education was sold to working-class families as the great equalizer, giving unlimited opportunity to those who would seize it” wrote CRL. “Yet, according to the Federal Reserve, every $1,000 increase in student loan debt lowers the national homeownership rate by about 1.8 percentage points for public 4-year college students.”
“Between 2009 and 2022, median household income grew from $63,011 to $70,784, or about 12 percent,” CRL continued. “Comparatively, the average student loan debt grew nearly 32 percent, from $27,874 to $36,096, during that period.”
Student loan borrowers who have financially struggled to keep up with monthly payments may still enroll online at: https://studentaid.gov/announcements-events/save-plan.
“The SAVE Plan will significantly cut monthly bills for most borrowers, reduce loan default, and ensure that students loans don’t need to come before life necessities,” said Under Secretary James Kvaal. “With nearly 5.5 million people enrolled after only two months, it’s clear how much borrowers need a plan like SAVE. President Biden and our Administration remain committed to giving borrowers breathing room on their monthly payments and ensuring student loans aren’t a barrier to opportunity.”
Charlene Crowell is a senior fellow with the Center for Responsible Lending. She can be reached at Charlene.email@example.com.