The U.S. Department of Education has introduced the Savings on a Valuable Education (SAVE) Plan, a new income-driven repayment program for federal student loan borrowers.
The SAVE Plan is intended to simplify student loan repayment, lower payments, and provide additional benefits to borrowers.
Under the SAVE Plan, undergraduate student loan payments are limited to 5% of discretionary income, and unpaid interest is forgiven.
The SAVE Plan program also aims to forgive remaining balances after 20 or 25 years of repayment, and it streamlines the income-driven repayment process by automating the annual recertification.
To qualify for the SAVE Plan, borrowers must have federal student loans in good standing. Most types of federal student loans can be included, and even Federal Perkins Loans and Federal Family Education Loans (FFELs) can also be eligible to the SAVE Plan through consolidation.
Private loans and loans made to parents and loans in default are not eligible to the SAVE plan.
Enrollment is an easy process, with millions of borrowers being automatically enrolled if they were previously in the REPAYE Plan.
The SAVE Plan has enrolled 4 million people within two weeks of its launch in late July. The SAVE plan was developed in response to criticisms of existing plans that allowed interest to accumulate on borrowers’ debt, CBS News reports.
The application for the SAVE Plan is available on the Federal Student Aid website. Payments under the SAVE plan can be reduced by half or even be $0, with savings of up to $1,000 per year for many borrowers, CBS News added.