Student loans: Millions of borrowers sign up for 'most affordable' payment plan ever

More than 4 million student loan borrowers have enrolled in the new income-driven repayment plan that the Biden administration touts as “the most affordable ever.”

Of those, around 1 million are new enrollees for the Saving on A Valuable Education, or SAVE plan, according to the White House, which released data on the plan Tuesday. The majority were automatically transferred from the older Revised Pay As You Earn, or REPAYE, income-driven repayment plan.

The White House also released figures showing the number of student borrowers in each state who enrolled in the new plan.

Read: Worried about when student loan repayments resume? These programs could help

The hurdle, of course, is getting borrowers to apply before federal student loan payments restart in October and after interested resumed this month, following the expiration of the federal forbearance enacted during the pandemic.

The official SAVE application launched Aug. 22 at StudentAid.gov following a beta version that debuted July 30.

To help spread the word about the launch of SAVE, the Department collaborated with grassroots organizations like Civic Nation, the National Urban League, Rise, NAACP, the Student Debt Crisis Center, UnidosUS, and Young Invincibles.

Borrowers not enrolled in an income-driven plan or in a different income-driven plan can still switch by applying on StudentAid.gov. As of July 1, unpaid interest on loans won’t be added to the principal for borrowers in any IDR plan, except the income-based repayment (IBR) plan where capitalization is required by statute.

SAVE replaces and improves on the REPAYE plan for federal student loan borrowers by lowering monthly payments, providing faster forgiveness for some, and preventing balances from growing due to unpaid interest.

While the administration calls SAVE “the most affordable plan ever created,” individual circumstances do apply, an Education Department spokesperson said Tuesday. In some cases, the best income-repayment plan may not be the SAVE one, depending on the borrower’s situation.

Using the loan simulator can provide estimates for borrowers looking to compare plans. For a more personalized comparison, borrowers are encouraged to complete the IDR application process, according to an Education Department official.

Additionally, the Biden-Harris administration is still seeking other debt relief for borrowers, the Education Department official said.

Ronda is a personal finance senior reporter for Yahoo Finance and attorney with experience in law, insurance, education, and government.Follow her on Twitter @writesronda Read the latest personal finance trends and news from Yahoo Finance.

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