Student Loan Update: Biden Admin Encourages More To Enroll in New Plan

The Biden administration is pushing to enroll more student loan borrowers in a new income-driven repayment plan before payments resume in October.

The U.S. Department of Education is hosting events across the country with 100 participating organizations during a "SAVE on Student Debt" week of action this week.

The events aim to support millions of borrowers who will have to start making payments when a three-year pandemic pause on federal student loan payments ends next month. Interest on student loans began accruing on September 1.

The Biden administration has been promoting a new income-driven repayment plan that it calls the "most affordable student loan repayment plan ever" after the Supreme Court struck down President Joe Biden's debt forgiveness plan, which would have wiped away or reduced the debts of more than 40 million Americans.

An estimated 20 million borrowers could benefit from the Saving on A Valuable Education (SAVE) Plan, the White House has said. But so far, only 4 million borrowers have enrolled in the plan, including many who were automatically enrolled from the previous Revised-Pay-As-You-Earn (REPAYE) plan.

According to the Education Department, the events this week will encourage borrowers to "take full advantage" of the SAVE Plan and other debt relief programs.

More than 4 million borrowers "are already benefitting from more affordable student loan payments under the SAVE plan, but we know there are so many more individuals and working families who stand to gain," Education Secretary Miguel Cardona said in a statement. "The Biden-Harris Administration is determined to get the word out about SAVE."

Organizations hosting events include American Federation of Teachers, Civic Nation, the NAACP, the Student Debt Crisis Center and Young Invincibles.

"Our partners in the SAVE on Student Debt campaign will amplify Federal Student Aid's outreach and communications to borrowers by working in communities across the country to encourage enrollment in the SAVE plan, which not only offers lower monthly student loan payments, but also protects borrowers from runaway interest and ever-growing balances," Cardona said.

Under the SAVE Plan, more borrowers will be eligible to not make repayments.

The plan will not require them to make any payments if they earn less than 225 percent of the federal poverty line—$32,800 a year for a single person or $67,500 for a family of four. The cutoff for current plans is 150 percent of the poverty line, or $22,000 a year for a single person. And interest won't pile up as long as borrowers make regular payments.

Biden also announced a 12-month grace period to help borrowers struggling after restarting payments. If they don't make payments in the 12 months after payments officially resume, they won't be at risk of default, and it won't affect their credit score. However, interest will accrue whether they make payments or not.

"Our top priority is to support borrowers and give them breathing room on their monthly payments, which is why President Biden launched the most affordable repayment plan ever—the SAVE plan," a White House spokesperson told Newsweek this week.

"We are also providing an on-ramp to repayment to protect borrowers who are unable to make their monthly payments initially from the harshest consequences of missed, partial or late payments. The Biden-Harris Administration has cancelled more than $117 billion in loan debt for more than 3.4 million borrowers, and we are not done helping borrowers—we will continue to find ways to give more breathing room to borrowers, cancel student loan debt, and grow the economy from the middle out and bottom up."

Borrowers who would like to repay their federal student loans under an income-driven plan can apply through the Federal Student Aid website. They can use the loan simulator tool at StudentAid.gov to calculate what their monthly payment would be under each available plan, and their long-term costs.