The Supreme Court has ruled against the Biden administration’s blanket college loan forgiveness plan, denying debtors the instant relief the program offered. But they still have better options for managing their debt than they did before the court took up the case.The SAVE plan will initially require borrowers to make monthly payments equal to 10% of their discretionary income — that is, 10% of the money they don’t need for housing, food and other necessities.
, which translates to $21,870 for a single individual or $45,000 for a family of four. With the SAVE plan, income up to 225% of the federal poverty level will be considered non-discretionary and excluded from the calculation of monthly payments. The result, according to the administration, is that a single borrower who makes less than $32,800 a year would have a monthly payment of $0. The administration estimates that more than 1 million borrowers fall into that category.One other immediate benefit: Borrowers on the SAVE plan whose monthly payments aren’t large enough to cover the interest their loan is accruing willhave that interest added to their loans.
On July 1, 2024, the SAVE plan will cut monthly payments on undergraduate student loans in half, to 5% of discretionary income. According to the department, borrowers with both undergraduate and graduate student loans would pay between 5% and 10% of their discretionary income, based on how much they borrowed for each level.
Once the plan goes into full effect, it will also offer speedier forgiveness for those who borrowed less. Ten years of repayments would be required for anyone who borrowed $12,000 or less; for each additional $1,000 borrowed, 12 more monthly payments would be required.