Why millions of student loan borrowers will have lower payments starting in July

Millions of borrowers will see their monthly student loan payments reduced starting in July, thanks to one of the Biden administration’s biggest changes to the federal student loan system to date.

Millions of borrowers will see their monthly student loan payments reduced starting in July, thanks to one of the Biden administration’s biggest changes to the federal student loan system to date. Last year, following the Supreme Court decision that knocked down President Joe Biden’s signature student loan forgiveness program before it took effect, his administration rolled out a new repayment plan known as SAVE (Saving on a Valuable Education) that will be fully phased in this summer. For most borrowers, the SAVE plan requires a lower monthly payment than other federal student loan repayment plans, and it cancels student debt for some borrowers after they make as few as 10 years of payments. More than 8 million people have enrolled in the SAVE plan to date. Most of the benefits offered by the SAVE plan are already in place, but one significant provision will take effect in July. The change could cut payments in half for some borrowers. Under the SAVE plan, monthly payments are calculated based on a borrower’s income and family size, regardless of how much student debt they have. Starting in July, monthly payments on loans borrowed for undergraduate school will be reduced from 10% to 5% of discretionary income.