By:  Kenneth Corbin, Barron’s featuring Vincent Birardi, CFP®, AIF®, Wealth Advisor at Halbert Hargrove

The Biden administration on Tuesday launched a new program to ease the burden of federal student loan debt for millions of borrowers struggling to pay down their student loans while balancing other financial priorities.


The Education Department is now accepting applications for an income-driven repayment (IDR) plan that it’s calling the Saving on a Valuable Education program, or SAVE, which the administration projects will save the typical borrower more than $1,000 a year.

“Starting today, millions of borrowers can reduce their monthly student loan bills by enrolling in the SAVE plan, the most affordable repayment plan in history,” says Education Secretary Miguel Cardona.

The administration is promoting the SAVE program as a favorable option for borrowers compared with other IDR plans. It would eliminate the accumulation of interest for borrowers who make their monthly payments, and not require workers making less than $15 an hour to make any payments at all.

The new plan also accelerates loan forgiveness for borrowers with low starting principal balances. Borrowers who took out $12,000 or less in federal loans could have their remaining balances canceled after 10 years under the SAVE plan. Each additional $1,000 borrowed would add another year of repayment, so the remaining balance on a $14,000 initial loan would be forgiven after 12 years, for instance.

All outstanding balances would be forgiven after 20 years, according to a blog post explaining the program by the White House Council of Economic Advisers.

The Biden administration has made the reduction of student loan debt a central part of its education policy, arguing that too many Americans are saddled with too much loan debt to make progress on other financial priorities like saving for a home or retirement.

At the same time, Biden’s proposals have encountered significant political and legal opposition, most notably in June when the U.S. Supreme Court struck down the administration’s plan to cancel hundreds of billions of dollars in federal student loan debt.

Republicans have criticized the administration’s work in creating a new IDR plan along with other efforts to cancel or ease borrowers’ debt burden.

“[T]his IDR rule is deeply unfair to the 87% of Americans who currently have no student loans and will now have to foot the bill for someone else’s debt,” Bill Cassidy (La.), the ranking Republican on the Senate Health, Education, Labor, and Pensions Committee, said on June 30.

The new program is a complex undertaking that could have a significant impact on financial advisors’ clients who are navigating their own debt repayments, says Vincent Birardi, an advisor at Halbert Hargrove.

“This new effort is more involved compared to the Biden administration’s previous attempt to reduce the student debt burden carried by millions of Americans,” Birardi says. “Potential benefits of the SAVE program to each individual carrying student debt will understandably vary, so financial advisors should be proactive in assisting their clients that have student debt to analyze those benefits and navigate any complicated changes to payment plans.”

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