Students, alums will benefit from new loan payment plans

Kelli Makenna Kuttruff
Staff Writer

The Biden-Harris Administration launched an income-based student loan repayment plan designed to make paying back student loans more doable last month.

This Saving on a Valuable Education Plan has replaced the previous income-based Revised Pay As You Earn Plan, and will be fully implemented next July. 

If a student loan borrower earned $38,000 and had a loan balance of $25,000 with a 5% interest rate, under the previous Revised Pay as you Earn Plan they would owe $134 monthly. However, with the Saving on a Valuable Education plan they would owe $43 a month according to the Federal Student Aid website

As of Aug. 22 those who were previously enrolled in the Revised Pay as you Earn Plan may be automatically enrolled in the Saving on a Valuable Education Plan, and all other graduates who took out federal student loans can now enroll in this new plan via StudentAid.gov.

“One of the things you can do during your six-month grace period between graduating and going into repayment is apply to be in one of these income-based repayment plans,” University of La Verne’s director of financial aid, Laura Evans said. 

The current administration is “making some really critical changes to that repayment plan to make it even more equitable to students as they are in repayment,” Evans added.

The Biden-Harris administration has also confirmed student loan forgiveness for over 3.4 million people, who have taken out student loans for over $116.6 billion. They are able to ensure this by addressing previous issues from administrative mistakes that occurred when counting payments that qualified for forgiveness. Those eligible for this forgiveness include those with Direct Loans or Federal Family Education Loans who qualify for forgiveness parameters, according to the Department of Education. 

Those who borrowed with an original principal balance of $12,000 or less are considered low balance and will receive forgiveness after 10 years or 120 payments. There are an additional 12 payments for each additional $1,000 borrowed above $12,000, with a maximum of 20 years of repayment for only undergraduate loans, or 25 years for any graduate loans according to the Department of Education fact sheet

But the most pronounced change in the new plan is reduction of monthly loan payments to make them truly income sensitive.  

A single student loan borrower earning $32,800 or less or a family of four earning $67,500 or less will not own loan payments. Those earning more than this will save at least $1,000 annually compared to other income sensitive loan repayment plans, according to the Federal Student Aid Office website.  

The website also states that qualifying student loans include direct subsidized loans, direct unsubsidized loans, direct PLUS loans made for graduate students and direct consolidation loans that did not repay PLUS loans made to parents. 

This new plan is available to all students who have taken out one of these qualifying federal student loans, and GPA and academic standing are not a deciding factor, according to the U.S. Department of Education. 

President Joe Biden made efforts to reduce the weight of student loan debt before with a previous plan that would have forgiven up to $20,000 in student loan debt, which would have relieved up to 40 million people. This plan was overturned in a 6-3 ruling by the U.S. Supreme Court on the opinion that his plan exceeded his authority under the HEROES Act. The aftermath of the Supreme Court ruling set the stage for the Biden-Harris Administration’s income-based Saving on a Valuable Education Repayment Plan.

This SAVE plan ensures that a student’s interest can not exceed the monthly payment amount, which will stop the loan balance from growing past feasible repayment ability. The borrower will not be charged further interest for as long as their income stays at the degree where they do not have the discretionary income to pay the student loan, Evans said.

Evans said that it is a possibility that students in other income sensitive repayment plans are making payments that aren’t actually contributing to the repayment of their principal debt, but that this SAVE Plan ceases interest charges that aren’t covered by the amount of the calculated overall payment.

For example, if a student’s monthly interest was $100 of their $300 monthly loan payment (which would be typical in early repayment to pay interest first before the principal balance), and their payment got reduced to $75 monthly, they will not be charged that $100 a month in interest and will stop being charged when they reached the $75 a month of their actual payment. This ensures that their principal balance could not continue to grow because of uncontrollable interest, Evans explained.

After taking out a private student loan, senior communications major Amy Alcantara saw firsthand how accruing interest could impact her overall loan repayment. 

“They were charging me more in interest than I actually needed to pay for school,” Alcantara said. 

A massive improvement made by this SAVE Plan is that it “eliminates 100% of remaining interest for both subsidized and unsubsidized loans after a scheduled payment is made” according to the Federal Student Aid website

“Federal government loans are way better opportunities for people than they might think,” senior chemistry major Michael Sahagun said after his experience with federal and private loans. 

The University of La Verne Office of Financial Aid has information and counseling for students considering different loans. 

“ULV tries to make the process of understanding loans or signing up for them really transparent,” 2020 graduate Andrew Alonzo said.

Alonzo believes that a program such as the SAVE program could greatly assist him with his monthly payments. He is currently employed at a local paper and believes that if there is a way to save on monthly expenses and repayments, this plan could be a saving grace.

“Every single student has a financial aid advisor that has been assigned to their case, and that person is here to assist you through these decisions, the application process, and to help you understand what your options are from start to finish” Evans said.

The University of La Verne Office of Financial Aid is open Monday, Tuesday, Thursday and Friday from 8 a.m. to 5 p.m. and Wednesday from 10 a.m. to 5 p.m.

Kelli Makenna Kuttruff can be reached at kelli.kuttruff@laverne.edu

Kelli Makenna Kuttruff is a senior communications major with an emphasis in public relations. She is the arts editor of the Campus Times, and is in her second semester as a staff writer.

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