Savings Opportunity and Affordable Repayment Act

This bill creates a new federal student loan repayment option called the Savings Opportunity and Affordable Repayment plan. It begins 180 days after the law takes effect. Your monthly payment is based on your income: $0 if your income is at or below 250% of the poverty line; above that, you pay 5% toward the part of your debt from undergraduate loans and 10% toward other loans, based on how much of your total debt each makes up. Very small calculated payments are set to $0 (under $5) or $10 ($5 to under $10). Half of every payment goes straight to principal, and any interest your payment doesn’t cover is not added to your balance.

Staying in this plan leads to cancellation of any remaining balance after 10 years if your loans are only from two years or less of undergraduate study, or after 15 years if you have other kinds of loans. Months with a $0 payment count, and many deferments and forbearances count too (for example, cancer treatment, unemployment, military service, Peace Corps, certain emergencies, and others) . You can switch to a different plan at any time. Married borrowers can have payments based only on their own income if they file separately or are separated; otherwise a spouse’s income may be included, with the amount adjusted by each person’s share of the loan debt. The Department tracks progress and will cancel loans automatically once you qualify, and it recertifies income yearly with an option to recalculate if your situation changes (with a brief forbearance while it’s processed) .

• Who is affected: People with “eligible loans,” meaning loans made, insured, or guaranteed under certain federal programs (parts B or D).
• What changes: A new income-based plan with $0 payments for many low-income borrowers, 5%/10% payments above that, no added unpaid interest, and faster principal paydown; cancellation after 10 or 15 years; clear rules for married borrowers and for counting paused months .
• When: The new plan starts 180 days after enactment. Two years after enactment, the Pay As You Earn and the traditional Income-Contingent Repayment plans close to most new enrollees; people already in them can stay but can’t re-enroll if they leave. Some loans made on behalf of dependent students become eligible under the older ICR plan.