Student Loan Debt Relief: Are You Eligible? How to Apply

Student loan interest will start accruing on Friday and payments will restart in October when a three-year pause prompted by the COVID-19 pandemic comes to an end.

But the millions of borrowers who hoped to see their balances decreased or wiped away before the Supreme Court struck down President Joe Biden's debt forgiveness plan can seek relief in another way.

They can now apply to enrol in the Saving on a Valuable Education (SAVE) Plan, a new income-driven repayment plan that offers lenient terms to borrowers worried about how they'll afford to make payments when the pause ends in the fall.

Biden called it "the most affordable student loan plan ever." A typical borrower who enrolls in the plan will save around $1,000 a year, he said.

Under the SAVE Plan, more people will be eligible for $0 payments.

The new plan won't require borrowers to make 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.

The SAVE plan also aims to prevent snowballing interest.

As long as borrowers make their monthly payments, their overall balance won't grow. Once their adjusted monthly payment is paid— even if it is $0—any remaining interest will be waived. Other major changes will take effect in July 2024.

"I've said it before and I'll say it again, as long as I'm president, my administration will never stop fighting to deliver relief to borrowers and bring the promise of college to more Americans," Biden said in a video earlier in August. "And that's a commitment."

Those enrolled in the existing Revised Pay As You Earn (REPAYE) Plan will be automatically enrolled in the SAVE Plan.

Others can apply by visiting www.studentaid.gov/save.

The application is available online and in paper form (downloadable via PDF). The online application is available in English, and the paper form is available in English and Spanish.

To apply, applicants need a verified Federal Student Aid ID, their financial information from tax returns, their personal information and their spouse's information if applicable.

The SAVE Plan is available to all borrowers in the Direct Loan Program who are in good standing on their loans.

Eligible loans for the SAVE Plan include: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans made to graduate or professional students, and Direct Consolidation Loans that did not repay any PLUS loans made to parents.

Loans that must first be consolidated into a Direct Consolidation Loan to be eligible for repayment under the SAVE Plan are: Subsidized Federal Stafford Loans (from the FFEL Program), Unsubsidized Federal Stafford Loans (from the FFEL Program), FFEL PLUS Loans made to graduate or professional students, FFEL Consolidation Loans that did not repay any PLUS loans made to parents, and Federal Perkins Loans.

Loans that are not eligible for repayment under the SAVE Plan are: Direct PLUS Loans made to parents, Direct Consolidation Loans that repaid PLUS loans made to parents, FFEL PLUS Loans made to parents, FFEL Consolidation Loans that repaid PLUS loans made to parents, and any loan that is currently in default.

Those who have loans in default may qualify for the Fresh Start Initiative to get their loans back in good standing.