The Finance Therapist-
Unveiling the SAVE Plan - A Game-Changing Student Loan Repayment Program

In this episode, we dive into the recent launch of the SAVE plan by the Biden administration, a groundbreaking student loan repayment program designed to offer borrowers a much-needed financial break. Here's what you need to know:

• The Biden administration has introduced the SAVE plan through a beta application, giving borrowers an early chance to enroll in this innovative repayment program.

• The SAVE plan is tailored to peg borrowers' monthly payments to their income, providing a welcome relief from financial burdens. Unlike previous IDR options, it addresses the snowballing interest issue that has troubled borrowers in the past.

• The rollout of the beta site coincides with the impending resumption of student loan repayments this fall, following a three-year pause due to the COVID health crisis. This development comes just a month after the Supreme Court blocked President Joe Biden's ambitious plan to forgive up to $20,000 in debt per student borrower.

- Wondering how much you can save with the SAVE plan? According to the Biden administration, monthly payments could be cut in half or even reduced to $0. Some borrowers may save up to $1,000 annually on their repayments.

• Eligibility for the SAVE plan is open to borrowers with a direct loan in good
• standing, as per the Education Department's guidelines. Notably, it will replace the existing Revised Pay-As-You-Earn (REPAYE) plan, automatically enrolling current REPAYE plan participants into SAVE with adjusted payments.

• The core mechanism of the SAVE plan revolves around reducing the percentage of personal income allocated to student loans each month. For undergraduate loans, the current IDR model mandates borrowers to pay 10% of their income above 225% of the poverty line. However, the SAVE plan slashes this to just 5%, offering significant relief.

• For individuals with both undergraduate and graduate loans, payments are based on a weighted average ranging from 5% to 10% of their income, considering the original principal balances of their loans.

• As an example, a borrower with an income of $40,000 and two family members may expect to pay $47 monthly under the SAVE plan.

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