The Biden administration announced the new income-based SAVE (Saving on a Valuable Education) student loan repayment plan.
The plan will lower monthly payments for borrowers who earn less than $15 an hour.
When borrowers make monthly payments for at least 20 years, any remaining balance will be forgiven.
The news comes as millions of borrowers are set to begin repaying their student loans in October. Three years of interest will begin accruing in September.
According to Business Insider, SAVE will prevent balances from growing on a borrower’s unpaid interest.
Biden’s Council of Economic Advisors said in a blog post that “one of the biggest new benefits to borrowers is how the SAVE plan handles unpaid interest.”
“With the SAVE plan, we are making a promise to every student,” Education Secretary Miguel Cardona told reporters on Monday afternoon. “Your payments will be affordable. You’re not going to be buried under a mountain of interest, and you won’t be saddled with a lifetime of debt.”
In June, the U.S. Supreme Court struck down Biden’s original plan to forgive up to $20,000 in federal student loans.
More than 30 million borrowers can begin enrolling in the SAVE plan in the next four weeks. Borrowers will have time to enroll before the first payment comes due.
Parents who borrowed money to pay for their children’s education using Parent PLUS loans cannot enroll in the new plan.
