Thursday, June 20, 2024 6:23PMMillions of borrowers will see their monthly student loan payments reduced starting in July, thanks to one of the Biden administration's biggest changes to the federal student loan system to date.
Most of the benefits offered by the SAVE plan are already in place, but one significant provision will take effect in July. The change could cut payments in half for some borrowers.Under the SAVE plan, monthly payments are calculated based on a borrower's income and family size, regardless of how much student debt they have.
For example, a borrower with $20,000 from his or her undergraduate education and $60,000 from graduate school will pay 8.75% of his or her income, according to a fact sheet provided by the Biden administration. "As the department finalizes preparations for the full universe of borrowers eligible for lower monthly payments, some borrowers may be placed in a brief processing forbearance to ensure they can access the full benefits of the SAVE Plan and that their new payment amounts are accurate," the Department of Education said in a statement.
Borrowers enrolled in SAVE may also be eligible for student debt relief in a shorter amount of time than under other income-driven plans. Those who borrowed $12,000 or less will see their debt forgiven after paying for just 10 years under SAVE. Every additional $1,000 borrowed above that amount would add one year of monthly payments to the required time a borrower must pay. Under other repayment plans, borrowers must make at least 20 years of payments before receiving debt forgiveness.
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