Biden-Harris Administration to Shorten Path to Debt Cancellation for Some SAVE Borrowers

Today, the Biden-Harris Administration announced that next month it will start providing forgiveness after as few as 10 years of payments for borrowers on the Saving on a Valuable Education (SAVE) Plan who originally took out $12,000 or less for college. Borrowers enrolled in SAVE who are eligible for early forgiveness will have their debts cancelled immediately starting next month, with no action on their part. To help as many borrowers as possible benefit from this action, the (Department) is kicking off an outreach and email campaign to encourage borrowers who are not currently enrolled in SAVE to sign up because they may benefit from this shortened repayment period. The Administration is also announcing today that there are now 6.9 million borrowers enrolled in the SAVE Plan as of early January, more than double the enrollment on the Revised Pay As You Earn (REPAYE) plan it replaced in August.

The shorter time to forgiveness benefit will particularly help borrowers who attended community colleges; these students typically borrow smaller amounts. Overall, the Department estimates that the SAVE Plan will make 85% of future community college borrowers debt free within 10 years. The SAVE Plan will also help borrowers who are more likely to struggle with their loans, as most borrowers in default originally borrowed $12,000 or less.

“Beyond being the most affordable student loan repayment plan ever available, the Biden-Harris Administration designed the SAVE Plan to put community college students and other low-balance borrowers on a faster track to debt forgiveness than ever before,” said U.S. Secretary of Education Miguel Cardona. “Our ability to deliver this relief to borrowers months ahead of schedule is a testament to the Biden Administration’s commitment to delivering relief to as many borrowers as possible, as quickly as possible. Today’s announcement gives borrowers an even greater reason to check out the SAVE plan and find out if they may qualify for earlier debt relief. With lower monthly payments, protection from runaway interest, and faster timelines to debt forgiveness, President Biden’s SAVE plan is not only benefitting millions of current borrowers but also providing the students of today and tomorrow with a more affordable pathway to college degrees and credentials.”

The Department is accelerating this benefit months ahead of the date previously laid out in the Biden-Harris Administration’s final regulations for implementing the SAVE plan, which is July 1, 2024. Borrowers enrolled in SAVE who have made at least 10 years of monthly payments and originally took out $12,000 or less for undergraduate or graduate postsecondary studies are eligible for forgiveness. For every $1,000 borrowed above $12,000, a borrower can receive forgiveness after an additional year of payments. That means a borrower who originally borrowed less than $21,000 will be eligible for forgiveness faster than the 20-year timeline for undergraduate borrowers on SAVE. The benefit is based upon the original principal balance of all federal loans borrowed to attend school, not what a borrower currently owes or the amount of an individual loan. Periods that count toward the forgiveness benefits include months during the payment pause and time in repayment as determined through the payment count adjustment.

“Today’s announcement will help struggling borrowers who have been making loan payments for years, including many who never graduated from college,” said Under Secretary James Kvaal. “Giving borrowers with smaller loans a faster path to being debt free will help many borrowers avoid financial distress and have peace of mind.”

The Biden-Harris Administration is also kicking off a wave of outreach to encourage more borrowers to enroll in SAVE, particularly those who may be able eligible for immediate forgiveness. Today, the Department will begin emailing borrowers whose balances and time in repayment indicates they may benefit from the shortened time to forgiveness provision. The Department will also work with the SAVE on Student Debt coalition and other supportive organizations to conduct further outreach in the coming months.

In February, the Department will start notifying borrowers on SAVE who are eligible for forgiveness that their loans are being discharged automatically with no action needed on the borrower’s part. The Department will also email borrowers not on SAVE who can receive forgiveness as soon as they sign up for the plan. Moving forward, the Department will continue to identify and discharge the loans of eligible borrowers on a regular basis. The Department strongly encourages all eligible borrowers who originally borrowed $12,000 or less to apply for SAVE as soon as possible.

For student borrowers, the SAVE Plan remains the most affordable repayment option in most cases. Under the SAVE Plan, single borrowers who earn less than $32,800 per year or those in a family of four making less than $67,500 have a $0 payment. The SAVE Plan also ensures that a borrower’s balance will never grow due to unpaid interest as long as they are making their monthly payments. The improved application allows borrowers to have their income securely accessed through the Internal Revenue Service so they do not need to re-certify their income or reapply for plans like SAVE each year. Savings for borrowers will increase again when the Department implements further payment reductions for borrowers with undergraduate loans in July 2024.

Continued Increases in SAVE Enrollment

The Biden-Harris Administration also announced today that there are now 6.9 million borrowers enrolled in the SAVE plan. This includes 2.8 million borrowers on SAVE who are new to an income-driven repayment (IDR) plan and approximately 700,000 who have switched from another income-driven repayment plan. Overall, borrowers are repaying $374 billion in federal student loans on the plan, about 30% of all Direct Loans dollars in repayment, deferment, or forbearance.

Borrowers are continuing to see significant financial benefits from being on SAVE compared to the previous REPAYE Plan. Of SAVE enrollees, 3.9 million have a $0 payment, while borrowers who owe a payment are saving an estimated $117 a month (just over $1,400 a year). These savings don’t include the interest that borrowers avoid each month after they satisfy their repayment obligation. Department data show that SAVE enrollment continues to be well targeted, as 75% of SAVE borrowers also received Pell Grants, which are awarded to low-income college students.

The SAVE Plan builds on the Biden-Harris Administration’s work to reduce the burden of student debt on America’s families. The Biden-Harris Administration has already approved nearly $132 billion in targeted relief for more than 3.6 million borrowers. Just last month, the Department announced the approval of an additional $4.8 billion in student loan debt relief for 80,300 borrowers. The Biden-Harris Administration has now approved:

• Almost $44 billion in IDR relief for nearly 901,000 borrowers;
• $53.5 billion for almost 750,000 borrowers through fixes to Public Service Loan Forgiveness that began in October 2021. By contrast, only about 7,000 borrowers had received forgiveness through these programs at the start of the Biden-Harris Administration.

The Biden-Harris Administration is currently in the process of writing proposed regulations that would make more borrowers eligible for debt relief. It also recently finalized regulations that help create the most effective accountability system ever for colleges that leave students with unaffordable debts and will continue to take action to reduce the cost of college and improve the value of postsecondary education.

Borrowers can view more resources and tools that help them find the right repayment plan for their current circumstances at StudentAid.gov/restart. More information about SAVE is available at StudentAid.gov/save.