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Report: Biden SAVE Plan May Increase Likelihood of Homeownership for Borrowers

Under the Biden-Harris administration’s student loan SAVE repayment plan, low- to moderate-income borrowers may be able to not only save more money, but also have an easier time owning homes for themselves, according to a joint report from the Center for Responsible Lending (CRL) and the California Policy Lab (CPL).Christelle BamonaChristelle BamonaCenter for Responsible Lending

The Saving on a Valuable Education (SAVE) plan is an income-driven repayment (IDR) plan meant to reduce the monthly payments that borrowers have to make, down to even $0 a month. IDR plans calculate repayment amounts based on income and family size.

The plan aims to achieve its goal by raising federal poverty guidelines so that less of people’s incomes are counted as “discretionary income” and by shrinking the percentage of discretionary income factored into monthly repayment values. Earlier this year, the U.S. Department of Education (ED)  announced that those who borrowed $12,000 or less can have their loans forgiven after as few as 10 years of repayment.

Since its unveiling as the “most affordable student loan repayment plan ever” about two months after the Supreme Court 2022’s rejection of the administration’s major student debt cancellation effort, the plan has seen 6.9 million borrowers enrolled, according to ED.

The report, "Unveiling the Potential of Saving on a Valuable Education (SAVE)," CRL researchers examined  credit data shared by the CPL to assess how the SAVE plan can help borrowers repay less each month. Much of CRL’s analysis for the report revolved around the Millennial generation, because the typical IDR-enrolled borrower is 38 years old, according to CRL researchers. And IDR-enrolled borrowers usually have annual low- to moderate- incomes, the report stated.

Millennial IDR borrowers could see their monthly repayment values drastically go down by more than $100 under the SAVE plan, the report noted.  Average monthly payments of $193 would decrease to $67 for those with only undergraduate loans and $117 for those with both undergrad and graduate loans.

And notably, borrowers from majority minority neighborhoods – zip codes with populations of at least 50% Black or Latino residents – could see larger monthly payment reductions than those from majority-White neighborhoods, according to the report.

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