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For some, the SAVE plan for student loans has meant monthly payments of zero

SCOTT SIMON, HOST:

As of November, nearly 3 million federal student loan borrowers had monthly payments of $0, according to the U.S. Department of Education. That's in part because of a new repayment plan known as SAVE. NPR's Cory Turner joins us. Cory, thanks so much for being with us.

CORY TURNER, BYLINE: Thanks for having me, Scott.

SIMON: SAVE, of course, stands for Saving on a Valuable Education. How are these $0 payments possible?

TURNER: So bear with me here for a second. It is fundamentally a repayment plan that bases a borrower's monthly payment on their income. So the less they make, the less they have to pay each month. Now, this isn't a new idea, but what is new is SAVE is a lot more generous than anything that's come before. And that's true in a few different ways. So, for example, monthly loan payments are not based on all of a borrower's income, just on what is considered extra or discretionary. And one thing that SAVE does is it increases how much income is considered off-limits. Shorthand, that means a lot more borrowers will now qualify for essentially a $0 monthly payment, because the federal government says you don't have any discretionary income. Like we said in the intro, of the 5 1/2 million borrowers who are now enrolled in SAVE, more than half, almost 3 million of them, have one of these $0 monthly payments. I should also say, Scott, SAVE stands out because whatever interest is not covered by your monthly payment, especially if it's $0 - that interest now gets wiped away.

SIMON: Well, let me ask for your counsel on something, though. One of our producers here has student loans, enrolled in SAVE and discovered that her monthly payment just came down by about $20. Let me put you on the spot. Why?

TURNER: Let me get my crystal ball here. No, actually, there are two potential explanations here, Scott. First, as part of this huge transition of tens of millions of borrowers back to repayment, I will say loan servicers and the Education Department have made a lot of mistakes when it comes to calculating borrowers' monthly payments under SAVE. So sadly, that wouldn't surprise me if that's the explanation. But there's another explanation, and that is, everyone enrolling in SAVE needs to understand that probably the biggest change that's really going to save borrowers money hasn't even happened yet.

So this is pretty nerdy. Bear with me here. That monthly payment math that we were talking about earlier - I said SAVE messes with it in two ways. So as we said, it exempts more of borrowers' income from being considered discretionary. But then, right now, borrowers' payments are 10% of that discretionary income of whatever is left, right?

Well, in July - next year, 2024 - for undergraduate borrowers, that's going to drop. Instead of 10% of your discretionary income, it's going to go down to 5%, which might sound a little weird and tedious, but what it means for borrowers is basically it's going to cut their monthly payments in half. So for folks like your producer thinking my payments are not as low as I thought it would be, just wait.

SIMON: This sounds generous, but how much is it going to cost?

TURNER: So we know from the Penn Wharton Budget Model that the price tag could be as much as $475 billion across 10 years, which is a lot of money. And it's one reason why many Republicans are - I don't think it's overstating it to say furious about the SAVE plan. Congresswoman Virginia Foxx, who is the Republican chair of the House Education Committee - Scott, she hates SAVE with the heat of a thousand suns. Honestly, like, on the House floor earlier this week, she said SAVE is, quote, "President Biden's game of ruling by executive decree, pinning the tab on the taxpayer." She called it reckless, inflationary and illegal. In fact, House Republicans just tried to overturn the SAVE plan. But a similar effort has already failed in the Senate, and President Biden has made clear even if it does get to his desk, he'll veto it.

SIMON: NPR's Cory Turner, thanks so much.

TURNER: You're welcome, Scott.

SIMON: And Cory, remind us, what's the address where listeners can read all of NPR's student loan coverage?

TURNER: It's super easy - npr.org/studentloans. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Scott Simon is one of America's most admired writers and broadcasters. He is the host of Weekend Edition Saturday and is one of the hosts of NPR's morning news podcast Up First. He has reported from all fifty states, five continents, and ten wars, from El Salvador to Sarajevo to Afghanistan and Iraq. His books have chronicled character and characters, in war and peace, sports and art, tragedy and comedy.
Cory Turner reports and edits for the NPR Ed team. He's helped lead several of the team's signature reporting projects, including "The Truth About America's Graduation Rate" (2015), the groundbreaking "School Money" series (2016), "Raising Kings: A Year Of Love And Struggle At Ron Brown College Prep" (2017), and the NPR Life Kit parenting podcast with Sesame Workshop (2019). His year-long investigation with NPR's Chris Arnold, "The Trouble With TEACH Grants" (2018), led the U.S. Department of Education to change the rules of a troubled federal grant program that had unfairly hurt thousands of teachers.