New Student Loan Plan Offers 10-Year Forgiveness and $0 Payments for Low Earners

The new Savings Opportunity and Affordable Repayment Act (SOAR) introduces a major new income-driven repayment (IDR) plan designed to make federal student loans significantly more manageable for most borrowers. Starting 180 days after enactment, this plan—called the Savings Opportunity and Affordable Repayment plan—will replace some older IDR language and offer a fresh path to loan forgiveness and lower monthly bills.

The New Math of Monthly Payments

This plan changes the formula for what you pay each month, tying it closely to the federal poverty line (FPL). If your adjusted gross income is at or below 250% of the FPL for your family size, your required monthly payment drops to $0. For context, 250% of the FPL is a decent income threshold, meaning many entry-level professionals or those working in lower-wage industries could see their payments eliminated entirely during lean times. For income above that 250% threshold, you pay 5% of that discretionary income if your debt is entirely from undergraduate loans, or 10% if you have graduate or other non-undergrad loans. If your calculated payment is between $5 and $10, it’s rounded up to $10; anything less than $5 is $0.

Accelerated Forgiveness and the Interest Shield

This is where the plan really shines for busy people trying to pay down debt. Instead of the 20 or 25 years required by some older IDR plans, SOAR accelerates loan forgiveness. If you only have undergraduate loans, your remaining balance is canceled after 120 qualifying payments (10 years). If you have any graduate debt, that timeline extends to 180 qualifying payments (15 years). Even better, the bill includes an “interest shield”: the government will not charge you any interest that isn't covered by your calculated monthly payment. This is a game-changer because it stops your loan balance from ballooning, a common frustration under current IDR plans where low payments often mean your debt grows instead of shrinks.

Real-World Impact: Who Wins and Who Needs to Pay Attention

If you’re a recent grad with $30,000 in undergrad debt and your income is modest, this plan is a huge win. Your payments could be $0, and after 10 years, that debt is gone, freeing up capital for a down payment on a house or funding a 401(k). The bill also defines a “qualifying payment” broadly, including months where your payment is $0 and specific periods of administrative forbearance, like if the Department of Education messes up your paperwork.

However, there are a few key details to watch out for. First, if you fail to recertify your income and family size annually—a requirement for all IDR plans—the Department of Education will yank you off the SOAR plan and put you on the standard 10-year repayment plan. This could lead to a sudden and massive spike in your monthly payment, so keeping up with the paperwork is non-negotiable. Second, the plan explicitly excludes Federal Direct PLUS Loans taken out by parents for a dependent student. Parents with these loans are left out of this new, more generous system.

Finally, while the interest shield is a massive benefit, the bill gives the Secretary of Education the authority to count “specific administrative forbearances” as qualifying payments toward forgiveness. This is currently vague and means the Department has a lot of discretion over what counts, which could lead to inconsistent application down the road. Overall, though, the SOAR Act offers a significantly better deal for the vast majority of federal student loan borrowers struggling with high balances and high interest.