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The Biden-Harris Administration launched an affordable student loan repayment plan – the Saving on a Valuable Education (SAVE) plan and kicked off an outreach campaign to encourage eligible borrowers to sign up for the plan. The administration estimates that over 20 million borrowers could benefit from this program. Meanwhile, new analysis has found that 90 percent of students who received a Pell Grant, federal financial aid for low-income students, still have unmet need, compared to 56 percent of students who never received a Pell Grant, Inside Higher Ed has reported.
According to the analysis by the Institute for Higher Education Policy, 88 percent of Black students, 82 percent of Hispanic students and 78 percent of Asian students, Native American students and Native Hawaiians and Pacific Islanders have unmet need, compared to 68 percent of white students. The analysis also found the average amounts of unmet need vary widely by race and socioeconomic status. Pell Grant recipients had an average unmet need of about $9,800, while students who never received a Pell Grant could generally cover college costs using grants and family money with an estimated $5,000 leftover on average.
The analysis also delves into the percentage of household incomes families need to spend to pay for college depending on their socioeconomic status. Students from families with the lowest incomes had to spend 148 percent of their household incomes to pay for full-time enrollment at a four-year college. Families with low incomes had to spend 51 percent, while middle-income families and high income families needed to spend 35 percent and 24 percent, respectively.
The SAVE plan is an income-driven repayment (IDR) plan that calculates payments based on a borrower’s income and family size – not their loan balance – and forgives remaining balances after a certain number of years. The SAVE plan will cut many borrowers’ monthly payments to zero, will save other borrowers around $1,000 per year, will prevent balances from growing because of unpaid interest, and will get more borrowers closer to forgiveness faster. The SAVE plan builds on broader actions by the Biden-Harris Administration to deliver relief to student loan borrowers, fix problems in the student loan system, and make college more affordable. However, the plans have come under fire as several organizations seek to end the cancellation of student debts.