The Biden administration recently announced its plans to expedite student loan forgiveness under the SAVE program, offering relief to borrowers as early as next month.
Eligibility Criteria
To be eligible for debt cancellation, borrowers must fulfill the following conditions:
- Enrollment in the SAVE program.
- Initial borrowing of $12,000 or less for undergraduate or graduate studies.
- Ten years of consistent debt repayment (including the pandemic payment pause period).
Additionally, borrowers who have borrowed more than $12,000 will be eligible for forgiveness after every additional year of payments.
Benefits for Community College Attendees
The Education Department highlights that this initiative will particularly benefit individuals who attended community college, as they typically borrow lesser amounts.
No Need to Take Action
Qualifying borrowers do not need to take any additional action for their debts to be canceled. The administration assures that those who are not yet enrolled in SAVE should do so promptly to take advantage of the accelerated timeline.
The SAVE Program
The Saving on a Valuable Education (SAVE) program was introduced last summer as an alternative after the U.S. Supreme Court struck down the administration’s initial plan for student loan forgiveness. Among the various income-driven repayment plans administered by the Education Department, SAVE stands out as the most generous.
Financial Relief and Preventing Negative Amortization
Aside from lowering monthly payments for many borrowers, SAVE also prevents the ballooning of interest in case a borrower’s payment is insufficient to cover monthly accrued interest. This prevents negative amortization, where loan balances continue to grow despite regular payments, placing borrowers in demoralizing and financially detrimental situations.
For those interested in participating in the SAVE program, enrollment can be completed here.
Loans Eligible for the SAVE Program
Loans eligible for the SAVE program include:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct PLUS Loans made to graduate or professional students
- Direct Consolidation Loans that didn’t repay any PLUS loans made to parents.
Enrollment Statistics
As of early January, there were 6.9 million borrowers enrolled in SAVE, surpassing the number enrolled in the REPAYE program, which SAVE replaced in August. Borrowers who were previously enrolled in REPAYE were automatically transferred to the SAVE program.
Challenges Faced by Borrowers
In recent months, many borrowers have faced challenges as federal student loan payments resumed following a pandemic pause of over three years. The Consumer Financial Protection Bureau highlighted several issues with the restart, including:
- Long hold times for borrowers trying to contact their student loan servicer.
- Significant delays in processing times for income-driven repayment plans.
- Inaccurate billing statements and disclosures.
