The Biden administration calls it a “student loan safety net.” Opponents call it a backdoor attempt to make college free. And it could be the next battleground in the legal fight over student loan relief. Starting this summer, millions of Americans with student loans will be able to enroll in a new repayment plan that offers some of the most lenient terms ever. Interest won’t pile up as long as borrowers make regular payments. Millions of people will have monthly payments reduced to $0. And in as little as 10 years, any remaining debt will be canceled. It’s known as the SAVE Plan, and although it was announced last year, it has mostly been overshadowed by President Joe Biden’s proposal for mass student loan cancellation. But now, after the Supreme Court struck down Biden’s forgiveness plan, the repayment option is taking center stage. Since the ruling Biden has proposed an alternate approach to cancel debt and also shifted attention to the lesser-known initiative, calling it “the most affordable repayment plan ever.” The typical borrower who enrolls in the plan will save $1,000 a month, he said. Republicans have fought against the plan, saying it oversteps the president’s authority. Sen. Bill Cassidy, the ranking Republican on the Health, Education, Labor, and Pensions Committee, called it “deeply unfair” to the 87% of Americans who don’t have student loans. The Congressional Budget Office previously estimated over the next decade the plan would cost $230 billion, which would be even higher now that the forgiveness plan has been struck down. Estimates from researchers at the University of Pennsylvania put the cost at up to $361 billion. Emboldened by the Supreme Court’s decision on cancellation, some opponents say it’s a matter of time before the repayment plan also faces a legal challenge. Here’s what to know about the SAVE Plan: WHAT IS AN INCOME-DRIVEN REPAYMENT PLAN? The U.S. Education Department offers several plans for repaying federal student loans. Under the standard plan, borrowers are charged a fixed monthly amount that ensures all their debt will be repaid after 10 years. But if borrowers have difficulty paying that amount, they can enroll in one of four plans that offer lower monthly payments based on income and family size. Those are known as income-driven repayment plans. Income-driven options have been offered for years and generally cap monthly payments at 10% of a borrower’s discretionary income. If a borrower’s earnings are low enough, their bill is reduced to $0. And after 20 or 25 years, any remaining debt gets erased. HOW IS BIDEN’S PLAN DIFFERENT? As part of his debt relief plan announced last year, Biden said his Education Department would create a new income-driven repayment plan that lowers payments even further. It became known as the SAVE Plan, and it’s generally intended to replace existing income-driven plans. Borrowers will be able to apply later this summer, but some of the changes will be phased in over time. Right away, more people will be eligible for $0 payments. The new plan won’t require borrowers to make payments if they earn less than 225% of the federal poverty line — $32,800 a year for a single person. The cutoff for current plans, by contrast, is 150% of the poverty line, or $22,000 a year for a single person. Another immediate change aims to prevent […]

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