WASHINGTON (TNS) — More than 170,000 Pennsylvania residents have enrolled in the new federal student loan program that will limit payments to a percentage of a borrower’s income and eventually forgive whatever balance remains after the original period of the loan.
Those enrolled in the Saving on a Valuable Education, or SAVE, plan, can save about $1,000 a year, James Kvaal, the undersecretary of education, said Tuesday.
”Student loans shouldn’t push you deeper into poverty,” he said on a conference call with reporters.
With payments on student loans scheduled to resume in October after being suspended during the coronavirus pandemic, the SAVE plan represents the most recent effort by President Joe Bidento reduce the debt burden for millions of college graduates.
The payments are based on the borrower’s income. Individuals earning $32,800 or less — about $15 an hour — or the borrower in a family of four earning $67,500 or less would not have to make any payments.
Beginning next year, borrowers will pay only 5% of their discretionary income — the difference between the adjusted gross income and 225% of the U.S. Department of Health and Human Services poverty guidelines — for student loans, down from the current 10%.
If the monthly income-based payment is not large enough to cover the interest owed on the loan, the balance will not grow. Instead, the Education Department will cancel the unpaid interest.
”Borrowers will never see their balance grow due to unpaid interest if they keep making payments,” Kvall said.
And after making monthly payments for the term of the loan, any remaining balance will be wiped out.
The program began accepting applications in July and more than 4 million borrowers already have enrolled, according to the U.S. Department of Education. That includes 170,200 in Pennsylvania, more residents than in all but six other states. Applications are at studentaid.gov.
An earlier effort to forgive balances of up to $20,000 was struck down in July by the U.S. Supreme Court. But Bharat Ramamurti, deputy director of the National Economic Council, said the Biden administration believed this latest plan will survive legal challenges.
Ramamurti said the administration is working on another loan-forgiveness program in response to the high court’s decision.
