Who receives $0 student loan payments?

( NEXSTAR)-- While trainee loan payments are set to begin quickly, some debtors could find themselves with $0 regular monthly payments.

It's due to the Biden administration's Saving on a Valuable Education, or SAVE, Plan, which officially launched Tuesday..

In a statement, Vice President Kamala Harris said the plan might save the average borrower around $1,000 a year. Tens of millions of debtors are expected to get approved for SAVE, which is now a primary income-driven repayment option for customers..

How does the strategy work?

According to the Education Department, SAVE calculates a month-to-month payment based on your earnings and household size.

" The SAVE Plan provides the lowest month-to-month payments of any IDR strategy readily available to almost all student customers," the department's Federal Student Aid Office discusses.

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Monthly payments are a lot lower on SAVE than other IDR plans because it increases the income exemption to 225% of the hardship line, up from 150%. This indicates a single debtor making $32,800 or less would owe no loan payments, according to the Federal Student Aid Office. For a family of four, that level is $67,500 or less.

Additionally, borrowers who make their month-to-month payments will not see their loan balance grow because of overdue interest.

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" If $50 in interest accumulates every month and you have a $30 payment, the staying $20 would not be charged," officials offered as an example.

Married customers who submit taxes individually no longer need to include their partner's earnings on their application, either.

How do you understand if you qualify?

The Education Department says any borrower with eligible loans (more on that in a moment) can get approved for the strategy.

SAVE is changing the Revised Pay As You Earn Repayment plan, better referred to as REPAYE. You instantly certify and have been enrolled in SAVE by the Department of Education if you were on the REPAYE strategy.

You'll also require to ensure your federal trainee loans qualify for the payment plan. That consists of direct subsidized and unsubsidized loans, direct PLUS loans (used for graduate or expert trainees), or direct debt consolidation loans that did not repay any PLUS loans made to moms and dads. There are five loans that can qualify just after they've been consolidated into a direct debt consolidation loan: subsidized and unsubsidized federal Stafford loans (both from the FFEL Program), FFEL PLUS loans (for graduate and professional students), FFEL consolidation loans that did not pay back PLUS loans made to moms and dads, and federal Perkins loans.

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There are some loans that do not certify. That consists of any loan currently in default, and four various loans made to moms and dads: direct PLUS loans, direct combination loans that repaid PLUS loans, FFEL plus loans, and FFEL combination loans.

How much will I owe?

Generally speaking, a borrower on the SAVE strategy will owe 10% of their discretionary income, according to the Department of Education.

As discussed above, a single borrower making roughly $30,000 will have an estimated regular monthly payment of $0 on the SAVE plan. A debtor in a household of five making roughly $60,000 or less will also owe $0 monthly.

The Federal Student Aid Office used the listed below graph showing how much a debtor might owe month-to-month.

Graphic from Department of Education Office of Federal Student Aid.

Ultimately, the simplest way to determine just how much you might owe is to get the plan online. The Department of Education states using takes about 10 minutes. You'll need an FSA ID (which you most likely have if you have federal student loans), individual info, financial details, and your partner's info, if relevant.

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In July 2024, debtors with undergraduate loans will see their regular monthly payments cut to 5% of their discretionary earnings, down from 10%. If you have an original balance of up to $12,000, you can see your loans forgiven after 10 years.