The new SAVE (Saving on a Valuable Education) plan promises to reduce student loan payments, set to resume next month after the pandemic related pause. Much like previous income driven repayment plans, SAVE calculates monthly payments based on income and family size to make payments more affordable for borrowers..
SAVE is calculated using the difference between a borrower’s discretionary income and 225% of the poverty level compared to existing income driven plans that calculate discretionary income as the deference between income and 150% of the poverty level. The new plan will lower monthly payments for some borrowers.
Although interest started to accrue again on existing student loan balances this month, under SAVE, unpaid interest will not accrue if a borrower makes a full monthly payment, meaning the borrowers balance will not increase even if their adjusted monthly payments do not cover the monthly interest. Additionally, next year, other parts of the SAVE plan will be phased that will cut payments in half for many undergraduate borrowers and shorten the time to debt forgiveness.
The SAVE plan requires the Department of Education to undertake a formal rule making process – taking anywhere from month to years to complete. The hefty price tag of the SAVE plan could face legal challenges moving forward, but so far there have been no serious efforts to stop the plan and borrowers can now apply for the SAVE plan through their lending institutions.
Regardless of SAVE, after a three year Covid 19 pause on payments borrowers may struggle with the resumption of payments on student loan debt. For individuals and families in a difficult financial situation, bankruptcy protection is also a strategy to tackle debt. Under a Chapter 7 bankruptcy, unsecured debt such as credit cards and medical bills can be discharged, which can provide borrowers with the ability to catch up on other debts which are generally not dischargeable such as student loans, child support arrears, and delinquent taxes. For individuals and families with more income and assets, a Chapter 13 bankruptcy repayment plan can protect borrowers from creditor actions while providing an affordable repayment plan to eliminate debt over time.
Many Americans are currently struggling with debt and bankruptcy protection can provide relief. If you have questions regarding bankruptcy protection, contact Peoria Illinois bankruptcy lawyer Charles E Covey for answers to your bankruptcy questions today.