Biden Launches ‘Beta Version’ of Revised Student Loan Repayment Plan

President Joe Biden gives remarks on student debt relief at Delaware State University in Dover, Del., on Oct. 21, 2022. Anna Moneymaker/Getty Images

The Department of Education has started the process of enrolling student loan borrowers into its Saving on a Valuable Education (SAVE) plan, just weeks after the U.S. Supreme Court quashed the Biden administration’s attempt to forgive billions of dollars in student loans.

SAVE is an Income-Driven Repayment (IDR) plan.

“A beta version of the updated IDR application is now available and includes the option to enroll in the new SAVE Plan—the most affordable repayment plan yet,” says the Student Aid website. “We’re accepting applications now to help us refine our processes ahead of the official launch. If you submit an IDR application now, it will be processed and will not need to be resubmitted.”

“The application may be available on and off during this beta testing period. If the application is not available, try again later. You will receive an email confirmation after you have applied.”

Activists rally outside the White House to call on President Joe Biden to cancel student loan debt on July 27, 2022. It turns out student loans cost taxpayers much more than the Government Accountability Office estimated. Anna Moneymaker/Getty Images

On June 30, the U.S. Supreme Court voted in a 6–3 decision to strike down the Biden administration’s controversial student loan forgiveness plan, which would have canceled as much as $20,000 for around 40 million borrowers, resulting in a massive $800 billion tax-payer commitment.

Following the SCOTUS ruling, Mr. Biden promised he would pursue a “new way” to circumvent the decision. On the same day as the ruling, the Department of Education (DOE) announced the SAVE plan.

At present, the DOE offers four Income-Driven Repayment plans for students to pay off their debts—Revised Pay As You Earn Repayment Plan (REPAYE Plan), Pay As You Earn Repayment Plan (PAYE Plan), Income-Based Repayment Plan (IBR Plan), and Income-Contingent Repayment Plan (ICR Plan).

The SAVE plan is intended to replace the REPAYE plan, which is one of the most widely used of the four existing plans. The remaining three will be phased out or limited by the DOE.

Borrowers who are already enrolled in the REPAYE plan or recently applied for it will automatically be transferred to the SAVE plan. There is no need to reapply for such borrowers.

Debt Cancelation in Another Form

According to the SAVE plan, borrowers with undergraduate loans will only make payments equal to 5 percent of their discretionary income rather than 10 percent. The Biden administration estimates this would save borrowers roughly $1,000 annually.

In addition, loan forgiveness will be available for borrowers with balances of $12,000 or less after 10 years of repayments, down from the earlier 20-year repayment requirement.

President Joe Biden (left), joined by Education Secretary Miguel Cardona, speaks on student loan debt in the Roosevelt Room of the White House on Aug. 24, 2022. Alex Wong/Getty Images

The SAVE plan has attracted criticism for the burden it will add to government expenditure. The DOE’s own estimates has costs at $138 billion over a decade.

However, the Congressional Budget Office’s estimates arrived at $230 billion, while the Foundation for Government Accountability calculated the cost to likely come to $471 billion.

In an interview with The Epoch Times, Caleb Kruckenberg, an attorney at Pacific Legal Foundation, called the SAVE plan as just another form of debt cancellation.

“What they’re saying is, we’re not transferring any debt, we’re just changing the terms of repayment on the amount you have to repay everything,” he said.

“But at the same time, if you look at the policy, it’s saying, well, from a large number of borrowers, your monthly payment is going to be $0. And after a certain number of payments, we'll forgive your loans.

“I mean, that’s a more complicated way of saying we’re canceling debt,” he said.

SAVE vs REPAYE, Restarting Student Loan Repayments

The SAVE plan makes three significant changes compared to REPAYE. First, it raises the income exemption from 150 percent above the poverty line to 225 percent. As such, borrowers making $32,800 or less will not have to pay any amount as monthly repayment under the plan.

A second change is related to the unpaid interest on student loans. In the REPAYE plan, if a borrower has an unpaid interest on the loan, the government covers half of it while the remaining half keeps accumulating over time.

In the new SAVE plan, such an accumulation of interest does not happen. As long as borrowers meet their regular monthly payments, the government will cover the unpaid interest. Hence, the borrower’s loan balances do not keep growing provided they make monthly payments.

For instance, if a borrower has $50 in interest accumulating every month and they make their $30 monthly repayment as obligated, the remaining $20 will not be charged.

Thirdly, under the SAVE plan, spousal income for borrowers who are married but file their income tax returns separately will be excluded. Earlier, the borrower’s spouse had to co-sign their IDR application.

The Biden administration has begun enrollment of student loan borrowers into the SAVE plan just months before repayments on such debts are due to restart.

In March 2020, former president Donald Trump announced a pause on student loan payments and interest accrual due to the COVID-19 outbreak. The pause in repayments has since been extended eight times. This year, Congress passed a law that prevented any more extensions.

The current extension period ends in August. As such, interest in student debts will start accruing in September and borrowers are expected to make their first payments since the pandemic in October.