{"id":53949,"date":"2023-08-28T11:56:22","date_gmt":"2023-08-28T15:56:22","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/5-hidden-benefits-of-biden-student-loan-plan-could-have-major-impacts\/"},"modified":"2023-08-28T11:56:25","modified_gmt":"2023-08-28T15:56:25","slug":"5-hidden-benefits-of-biden-student-loan-plan-could-have-major-impacts","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=53949","title":{"rendered":"5 Hidden Benefits Of Biden Student Loan Plan Could Have Major Impacts"},"content":{"rendered":"
\n

The Education Department has officially launched a new student loan repayment program that the Biden administration is touting as the most affordable plan ever. The new initiative, called SAVE, will have a number of features including lower student loan payments and accelerated student loan forgiveness for certain borrowers.<\/p>\n

\u201cBorrowers will see their total payments per dollar borrowed fall by 40%\u201d under the new program, said the department in a statement issued last week. \u201cA typical graduate of a four-year public university will save nearly $2,000 a year,\u201d says the department.<\/p>\n

But while attention has focused primarily on SAVE\u2019s lower monthly payments \u2014 which are particularly relevant as the student loan pause comes to an end and millions of borrowers prepare for student loan payments to resume \u2014 there are other, lesser-known features of the plan that will have significant impacts, as well.<\/p>\n

Interest Benefits Will Result In Rolling Student Loan Forgiveness<\/h2>\n

Under previous income-driven repayment plans, there has been no historical requirement that payments cover all accruing interest each month. Consequently, many borrowers with low monthly student loan payments relative to interest accrual have watched their loan balances increase over time, even while they make their required monthly payments. This process of balance growth despite ongoing payments \u2014 called negative amortization \u2014 has been one of the most significant downsides of income-driven plans, leaving borrowers feeling trapped in debt as they owe increasingly more than what they originally borrowed.<\/p>\n

<\/fbs-ad><\/p>\n

But the SAVE plan ends negative amortization. Each month, the government will waive any interest accrual that exceeds a borrower\u2019s monthly student loan payment. This essentially amounts to rolling forgiveness of student loan interest, and will prevent borrowers\u2019 loan balances from ballooning over time.<\/p>\n

To illustrate, a borrower with a total federal student loan balance of $50,000, an interest rate of 6%, and a monthly income-driven payment amount of $100 per month would see their balance increase at the rate $150 per month. Over the course of a 20-year repayment term, their loan balance could reach $86,000. But under SAVE, that $36,000 in interest accrual over time would have been waived.<\/p>\n

No More Interest Capitalization Under Biden\u2019s Student Loan Plan<\/h2>\n

Borrowers who have already accrued interest will also be far less likely to experience interest capitalization under SAVE. Capitalization is the process by which accrued interest is added on to the loan principal, which can have a compounding effect over time. New regulations that went into effect in July will curtail future instances of interest capitalization. These benefits will also be available to borrowers in certain other IDR plans, such as the PAYE and ICR plans.<\/p>\n

\u201cAs of July 1, 2023, unpaid interest on your loans won\u2019t be added to your principal when you leave any IDR plan, except the Income-Based Repayment (IBR) Plan (where capitalization is required by statute),\u201d says Education Department guidance.<\/p>\n

Accelerated Student Loan Forgiveness Under SAVE<\/h2>\n

While much attention has been focused on SAVE\u2019s affordable repayment formula, the program will also accelerate student loan forgiveness for some borrowers.<\/p>\n

SAVE is similar to other IDR plans in that any remaining student loan balance would be forgiven after 20 or 25 years (depending on the type of loans that the borrower has). But SAVE also offers an accelerated student loan forgiveness track for borrowers with smaller initial loan balances.<\/p>\n

\u201cBorrowers with original principal balances of $12,000 or less will receive forgiveness of any remaining balance after making ten years of payments, with the maximum repayment period before forgiveness rising by one year for every additional $1,000 borrowed,\u201d says current Education Department guidance. \u201cFor example, if your original principal balance is $14,000, you will see forgiveness after 12 years.\u201d<\/p>\n

This particular feature of SAVE won\u2019t go live until July 2024. But the department notes, \u201cPayments made previously (before 2024) and those made from now on will count toward these maximum forgiveness timeframes.\u201d<\/p>\n

Additional Periods Can Count Toward Student Loan Forgiveness<\/h2>\n

The general rule under prior IDR plans was that only time spent in an IDR program can count toward student loan forgiveness. Most periods of deferment and forbearance would not count. And consolidating loans could reset the clock.<\/p>\n

But under SAVE, starting next year additional periods can count toward student loan forgiveness. These includes cancer treatment deferments, military service deferments, post-active-duty deferments, national service forbearances, National Guard Duty forbearances, Department of Defense student loan repayment program forbearances, and certain administrative forbearances. In addition, borrowers in other types of deferment and forbearance that normally don\u2019t count toward student loan forgiveness will be able to make \u201ccatch-up\u201d payments to get credit for those periods.<\/p>\n

Notably, under SAVE, borrowers who consolidate their loans will no longer lose all of their credit toward student loan forgiveness. \u201cThey will receive credit for a weighted average of payments that count toward forgiveness based upon the principal balance of the loans being consolidated,\u201d says Education Department guidance.<\/p>\n

Automatic Income Recertification For Student Loan Payments<\/h2>\n

One of the biggest historical problems with IDR plans has been the requirement that borrowers affirmatively recertify their income every year. Failure to recertify resulted in interest capitalization, a sudden increase in monthly payments, and lost credit toward student loan forgiveness. These problems were compounded by loan servicing issues, including processing delays and failure to send timely notices to borrowers.<\/p>\n

But under SAVE, borrowers will have the option to enroll in automatic annual income recertification by consenting to allow the IRS to share their income information with the Education Department.<\/p>\n

\u201cIf you agree to the secure disclosure of your tax information, we and your loan servicer will automatically recertify your enrollment in IDR and adjust your monthly payment amount once a year. You\u2019ll be notified when your payment is changing and you\u2019ll always be able to recertify your plan manually,\u201d says the department. While this feature technically won\u2019t be available until next year, borrowers can consent to the disclosure now when they first enroll, so that they\u2019ll be set up for automatic income recertification next year.<\/p>\n

Enrolling in automatic income recertification may also prevent some borrowers from defaulting on their loans. \u201cBorrowers who are 75 days late will be automatically enrolled in IDR if they have agreed to allow the U.S. Department of Education to securely access their tax information,\u201d according to guidance from the department.<\/p>\n

Further Student Loan Forgiveness Reading<\/strong><\/h2>\n

Student Loan Update: Only Days To Act On Some Key Repayment And Forgiveness Deadlines<\/p>\n

Mass Student Loan Forgiveness Emails Sent As Challengers Appeal To Block Debt Relief<\/p>\n

Student Loan Forgiveness Update: What The Latest Court Victory Means For Borrowers<\/p>\n

Student Loan Forgiveness Just Got Easier For These Borrowers<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The Education Department has officially launched a new student loan repayment program that the Biden administration is touting as the most affordable plan ever. The new initiative, called SAVE, will have a number of features including lower student loan payments and accelerated student loan forgiveness for certain borrowers. \u201cBorrowers will see their total payments per […]<\/p>\n","protected":false},"author":1,"featured_media":53950,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-53949","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-featured"],"yoast_head":"\n5 Hidden Benefits Of Biden Student Loan Plan Could Have Major Impacts | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The Education Department has officially launched a new student loan repayment program that the Biden administration is touting as the most affordable plan\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=53949\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"5 Hidden Benefits Of Biden Student Loan Plan Could Have Major Impacts | iFintechWorld\" \/>\n<meta property=\"og:description\" content=\"The Education Department has officially launched a new student loan repayment program that the Biden administration is touting as the most affordable plan\" \/>\n<meta property=\"og:url\" content=\"https:\/\/ifintechworld.com\/?p=53949\" \/>\n<meta property=\"og:site_name\" content=\"iFintechWorld\" \/>\n<meta property=\"article:published_time\" content=\"2023-08-28T15:56:22+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-08-28T15:56:25+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/08\/1693238184_0x0.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"675\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"News Room\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"News Room\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/ifintechworld.com\/?p=53949#article\",\"isPartOf\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=53949\"},\"author\":{\"name\":\"News Room\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61\"},\"headline\":\"5 Hidden Benefits Of Biden Student Loan Plan Could Have Major Impacts\",\"datePublished\":\"2023-08-28T15:56:22+00:00\",\"dateModified\":\"2023-08-28T15:56:25+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=53949\"},\"wordCount\":1101,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/ifintechworld.com\/#organization\"},\"keywords\":[\"Featured\"],\"articleSection\":[\"News\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/ifintechworld.com\/?p=53949#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/ifintechworld.com\/?p=53949\",\"url\":\"https:\/\/ifintechworld.com\/?p=53949\",\"name\":\"5 Hidden Benefits Of Biden Student Loan Plan Could Have Major Impacts | iFintechWorld\",\"isPartOf\":{\"@id\":\"https:\/\/ifintechworld.com\/#website\"},\"datePublished\":\"2023-08-28T15:56:22+00:00\",\"dateModified\":\"2023-08-28T15:56:25+00:00\",\"description\":\"The Education Department has officially launched a new student loan repayment program that the Biden administration is touting as the most affordable plan\",\"breadcrumb\":{\"@id\":\"https:\/\/ifintechworld.com\/?p=53949#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/ifintechworld.com\/?p=53949\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/ifintechworld.com\/?p=53949#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/ifintechworld.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"5 Hidden Benefits Of Biden Student Loan Plan Could Have Major Impacts\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/ifintechworld.com\/#website\",\"url\":\"https:\/\/ifintechworld.com\/\",\"name\":\"Repay Down\",\"description\":\"Latest Personal Finance News, Tips and Updates\",\"publisher\":{\"@id\":\"https:\/\/ifintechworld.com\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/ifintechworld.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/ifintechworld.com\/#organization\",\"name\":\"Repay Down\",\"url\":\"https:\/\/ifintechworld.com\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png\",\"contentUrl\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png\",\"width\":558,\"height\":90,\"caption\":\"Repay Down\"},\"image\":{\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/\"}},{\"@type\":\"Person\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61\",\"name\":\"News Room\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/ifintechworld.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png\",\"contentUrl\":\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png\",\"caption\":\"News Room\"},\"sameAs\":[\"https:\/\/ifintechworld.com\"],\"url\":\"https:\/\/ifintechworld.com\/?author=1\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"5 Hidden Benefits Of Biden Student Loan Plan Could Have Major Impacts | iFintechWorld","description":"The Education Department has officially launched a new student loan repayment program that the Biden administration is touting as the most affordable plan","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/ifintechworld.com\/?p=53949","og_locale":"en_US","og_type":"article","og_title":"5 Hidden Benefits Of Biden Student Loan Plan Could Have Major Impacts | iFintechWorld","og_description":"The Education Department has officially launched a new student loan repayment program that the Biden administration is touting as the most affordable plan","og_url":"https:\/\/ifintechworld.com\/?p=53949","og_site_name":"iFintechWorld","article_published_time":"2023-08-28T15:56:22+00:00","article_modified_time":"2023-08-28T15:56:25+00:00","og_image":[{"width":1200,"height":675,"url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/08\/1693238184_0x0.jpg","type":"image\/jpeg"}],"author":"News Room","twitter_card":"summary_large_image","twitter_misc":{"Written by":"News Room","Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/ifintechworld.com\/?p=53949#article","isPartOf":{"@id":"https:\/\/ifintechworld.com\/?p=53949"},"author":{"name":"News Room","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61"},"headline":"5 Hidden Benefits Of Biden Student Loan Plan Could Have Major Impacts","datePublished":"2023-08-28T15:56:22+00:00","dateModified":"2023-08-28T15:56:25+00:00","mainEntityOfPage":{"@id":"https:\/\/ifintechworld.com\/?p=53949"},"wordCount":1101,"commentCount":0,"publisher":{"@id":"https:\/\/ifintechworld.com\/#organization"},"keywords":["Featured"],"articleSection":["News"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/ifintechworld.com\/?p=53949#respond"]}]},{"@type":"WebPage","@id":"https:\/\/ifintechworld.com\/?p=53949","url":"https:\/\/ifintechworld.com\/?p=53949","name":"5 Hidden Benefits Of Biden Student Loan Plan Could Have Major Impacts | iFintechWorld","isPartOf":{"@id":"https:\/\/ifintechworld.com\/#website"},"datePublished":"2023-08-28T15:56:22+00:00","dateModified":"2023-08-28T15:56:25+00:00","description":"The Education Department has officially launched a new student loan repayment program that the Biden administration is touting as the most affordable plan","breadcrumb":{"@id":"https:\/\/ifintechworld.com\/?p=53949#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/ifintechworld.com\/?p=53949"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/ifintechworld.com\/?p=53949#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/ifintechworld.com\/"},{"@type":"ListItem","position":2,"name":"5 Hidden Benefits Of Biden Student Loan Plan Could Have Major Impacts"}]},{"@type":"WebSite","@id":"https:\/\/ifintechworld.com\/#website","url":"https:\/\/ifintechworld.com\/","name":"Repay Down","description":"Latest Personal Finance News, Tips and Updates","publisher":{"@id":"https:\/\/ifintechworld.com\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/ifintechworld.com\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/ifintechworld.com\/#organization","name":"Repay Down","url":"https:\/\/ifintechworld.com\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/","url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png","contentUrl":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/rep-logo-dark.png","width":558,"height":90,"caption":"Repay Down"},"image":{"@id":"https:\/\/ifintechworld.com\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/6224724fd4116361255b179dc5c70b61","name":"News Room","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ifintechworld.com\/#\/schema\/person\/image\/","url":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png","contentUrl":"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/04\/avatar_user_1_1682606986-96x96.png","caption":"News Room"},"sameAs":["https:\/\/ifintechworld.com"],"url":"https:\/\/ifintechworld.com\/?author=1"}]}},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/53949","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=53949"}],"version-history":[{"count":1,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/53949\/revisions"}],"predecessor-version":[{"id":53951,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/posts\/53949\/revisions\/53951"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=\/wp\/v2\/media\/53950"}],"wp:attachment":[{"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=53949"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=53949"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ifintechworld.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=53949"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}