The data shows that a federal student loan borrower with a normal student loan amount and interest rate could also save $63.43 on their monthly student loan payment compared to what they would have paid without it.
Borrowers with federally held student loans are entitled to a waiver of $10,000 ($20,000 for those receiving Pell grants) and $10,000 for low-income students under President Joe Biden’s student loan forgiveness plan announced last month in the United States. And some borrowers will benefit more than others.
How much monthly relief you will actually get for US students depends on how much you owe, your interest rate, and your loan repayment time. Savings will start when payments are resumed in January 2023 (they have stayed without any interest since the corona pandemic hit).
The United States collectively owed $1.6 trillion to 43 million borrowers with federally held student loans, for an average loan amount of $37,667. And it would pay a borrower $238.91 per month with that exact amount of the loan and also a standard 20-year repayment plan at an interest rate of 4.53% (the average of all rates in force since July 2006).
All else being equal, knocking $10,000 off the balance in the United States would cut the payment by $175.48. And if the borrower goes to college on a Pell grant, they’ll be forgiven $20,000, and their payment will be cut in half to $112.06. (And the amount saved is the same regardless of your loan balance, as long as it exceeds $10,000 or $20,000 for Pell grant recipients.)
If you have a loan of exactly $10,000 and a 12-year loan, your payment will drop from $90.15 to $0. But if you’re one of the few borrowers with three-digit loans and longer repayment times, such as $100,000 and a 30-year repayment plan, you’ll see your payments range from $508.47 to $457.62 with $10,000 forgiven—a savings of $50.85.
The calculation is different for income-driven repayment plans in the United States, in which monthly payments are based on a set percentage of your discretionary income rather than your loan balance. And under some plans, for example, Payout and Income-Based Repayment Programs, your payout never exceeds the standard 10-year repayment plan, and therefore, in some circumstances, your monthly payment may be even lower.
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