2.9 Million Borrowers Pay Nothing in Biden’s ‘Most Generous Ever’ Student Loan Repayment Plan

President Joe Biden is joined by Education Secretary Miguel Cardona as he announces new actions to protect borrowers after the Supreme Court struck down his student loan forgiveness plan in the Roosevelt Room at the White House on June 30, 2023. Chip Somodevilla/Getty Images

Nearly 5.5 million federal student loan borrowers have enrolled in what the Biden administration calls “the most generous” repayment option ever offered, federal officials said on Wednesday.

The repayment plan, dubbed the Saving on Valuable Education (SAVE) plan, went into effect in August as part of President Joe Biden’s regulatory effort to dramatically reduce monthly obligations for student borrowers who aren’t earning very much, with many borrowers seeing their bills shrink to practically nothing.

According to the latest update from the U.S. Department of Education, about 2.9 million of the SAVE plan’s current enrollees have incomes that are low enough that they have monthly payments of $0.

The updated SAVE enrollment figure includes 1.8 million borrowers who have newly signed up for the program, as well as another 364,000 borrowers who were automatically switched to SAVE because they had already been in one of the existing income-driven repayment (IDR) plans that the Biden administration seeks to replace with SAVE.

The new figure is based upon enrollment in the program as of Oct. 15. It reflects an increase from the the 4 million borrowers that the Education Department said were enrolled in the plan at the beginning of September.

Overall, borrowers are repaying $300 billion in federal student loans on the plan. That represents about 19 percent of the $1.6 trillion in outstanding debt from the federal student loan portfolio.

One of the biggest differences between the SAVE plan and IDR plans is that the amount of income incurring no charge, or protected income, rises from 150 percent above the federal poverty guidelines to 225 percent. Under the SAVE plan, payment also drops from 10 percent of the difference between earnings and protected income to 5 percent.

In practice, this means a single person who earns less than $32,800 a year is required to pay $0 a month. The same applies to a family of four that has an annual income less than $67,500.

On top of all that, under the SAVE plan, borrowers will see their remaining loan balances wiped out after 10 years of repayments. By comparison, it takes 20 or 25 years under IDR for borrowers to get their remaining debt canceled.

“I’m thrilled to see that in less than three months, nearly 5.5 million Americans in every community across the country are taking advantage of the SAVE Plan’s many benefits, from lower monthly payments to protection from runaway student loan interest,” U.S. Secretary of Education Miguel Cardona said in a statement on Monday, promising to “not rest” in the efforts to “make paying for college more affordable.”

Biden Plan Faces Republican Challenge

The SAVE plan is expected to cost billions in taxpayer dollars, a point Republican lawmakers have been emphasizing since the plan’s announcement.

Estimates vary widely, but one analysis by the University of Pennsylvania’s Wharton School suggests that the plan will cost about $475 billion in a span of 10 years.

“About $200 billion of that cost will come from payment reduction for the $1.64 trillion in loans already outstanding in 2023,” the analysis read.

According to the leading business school, the SAVE plan will be incentivizing college students to collectively borrow billions more dollars every year in the next decade due to the expectation that they may not have to repay the debt.

“The remainder of the budget cost, or about $275 billion, comes from reduced payments for about $1.03 trillion in new loans that we estimate will be extended over the next 10 years,” it added.

Citing Wharton’s estimates, a group of 17 Republican senators in September introduced a Congressional Review Act (CRA) resolution against the plan. A CRA resolution does not only nullify an existing rule but bans the federal agency from issuing the same rule again unless Congress later passes a new law authorizing the agency to do so.

“It’s incredibly unfair to those who never incurred student debt because they didn’t attend college in the first place or because they either worked their way through school or their family pinched pennies and planned for higher education,” said Sen. Bill Cassidy (R-La.), ranking member of Senate’s education committee.

“Our resolution protects the 87 percent of Americans who don’t have student debt and will be forced to shoulder the burden of the President’s irresponsible and unfair policy,” he added.

Sen. Cassidy is joined by Sens. John Barrasso (R-Wyo.), Mike Braun (R-Ind.), John Cornyn (R-Texas), Mike Crapo (R-Idaho), Steve Daines (R-Mont.), Joni Ernst (R-Iowa), Chuck Grassley (R-Iowa), Cindy Hyde-Smith (R-Miss.), Ron Johnson (R-Wis.), James Lankford (R-Okla.), Cynthia Lummis (R-Wyo.), Roger Marshall (R-Kan.), James Risch (R-Idaho), Tim Scott (R-S.C.), John Thune (R-S.D.), and Thom Tillis (R-N.C.).

A companion CRA resolution was introduced by Rep. Lisa McClain (R-Mich.) in the lower chamber. Both chambers are expected to vote on the Republican-led resolutions in the coming weeks.

In defense of the repayment plan, Mr. Cardona implored lawmakers seeking to undo it to speak with borrowers who are “drowning in debt.”

“We’re hearing from the American people who are drowning in debt and can’t buy a home in the economy because of college costs,” he said during a Sept. 8 interview on CNN. “Those who are vehemently opposed to it have not spoken to their constituents who are drowning, who need support, who need to make higher education more accessible.”