With about a month left before borrowers start receiving their first student-loan bill in years, roughly 4 million are enrolled in a new repayment plan the Biden administration has touted as a “game changer.”
Under the SAVE plan, borrowers have more income protected before payments kick in, and in some cases can devote a smaller share of their income towards the payments each month and stay current on their loans, among other benefits. Some of the benefits of the plan kick in when borrowers in October when student loan payments resume. Others don’t take effect until July 2024.
Officials launched SAVE after years of complaints surrounding income-driven repayment. The new plan addresses some concerns from advocates and borrowers. For example, under SAVE borrowers whose income-tied payments are too low to cover the interest on their debt will have the remaining interest paid for by the government. That means they won’t see their balances grow, even as they make payments, a perennial problem under previous versions of income-driven repayment.
Concerns about income-driven repayment remain Despite the changes, some of borrowers’ and advocates’ concerns about income-driven repayment remain. For one, not all borrowers have access to SAVE. Borrowers with Parent PLUS loans, or the federal loans parents can use to pay for their children’s schooling, generally aren’t eligible for SAVE. That’s even though this debt has posed major challenges for many of these borrowers.
Advocates also remain concerned that borrowers could still face logistical challenges to enrolling in SAVE. For years, they’ve said that servicers — the contractors the government hires to manage the student-loan portfolio — haven’t provided borrowers with enough or the right information to ensure they’re getting access to the benefits of the federal student loan program.
Roughly 3.3 million borrowers were enrolled in REPAYE, according to the most recent data from the Department of Education, indicating that about 700,000 of the 4 million borrowers enrolled in SAVE signed up and weren’t transferred automatically. The agency said nearly 1 million borrowers have applied for SAVE through its website since the soft launch of the SAVE plan on July 30.