Savings Opportunity and Affordable Repayment Act
- Bill Number
- S. 1220
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 1
- Policy Area
- Education
- Status
- Introduced
- Latest Action
- 2025-04-01: Read twice and referred to the Committee on Health, Education, Labor, and Pensions.
- Last Updated
- 2026-05-13T20:17:11Z
AI-Generated Summary
Purpose
The Savings Opportunity and Affordable Repayment Act (S. 1220) aims to make federal student loan repayment more affordable by creating a new income-based repayment option. This plan ties monthly payments to a borrower's income level, reduces interest accrual, and offers loan forgiveness after a set number of payments, helping borrowers manage debt without financial hardship.
Key Provisions
- New Repayment Plan (SOAR Plan): Introduces the "Savings Opportunity and Affordable Repayment" (SOAR) plan as an income-contingent repayment option for eligible federal student loans (including Direct Loans and some FFEL loans). Borrowers can elect this plan starting 180 days after enactment.
- Payment Calculation: Monthly payments are based on adjusted gross income (AGI, a tax term for income after certain deductions) and family size.
- $0 if AGI (including spouse's, if applicable) is at or below 250% of the federal poverty line.
- 5% of income above 250% poverty line for undergraduate loans (prorated by the share of undergrad debt).
- 10% of income above 250% poverty line for graduate or other loans (prorated by the share of non-undergrad debt).
- Minimums: $0 if calculated under $5; $10 if $5–$9.99.
- Payment Application: 50% of payments go directly to principal (the original loan amount); the other 50% covers fees, interest, and remaining principal. Unpaid principal is deferred (postponed) without penalty.
- Interest Handling: No interest accrues on the loan if not covered by payments during repayment.
- Loan Forgiveness: Remaining balance is canceled after:
- 120 qualifying payments (about 10 years) for borrowers with only short-term undergraduate loans (under 2 years of study).
- 180 qualifying payments (about 15 years) for all other eligible loans.
- Qualifying Payments: Include actual payments, $0 payment months, certain deferments (pauses due to hardship, military service, etc.), forbearances (temporary payment pauses), and payments under other plans. Some forbearances require extra payments to count.
- Flexibility for Borrowers:
- Borrowers can switch to or from the SOAR plan at any time if eligible for other plans.
- Allows multiple installments, lump-sum prepayments, or advance payments up to the next annual income recertification.
- Income Verification and Procedures:
- Uses IRS tax data (with borrower approval) or alternative documentation for annual recertification.
- If documentation is late, borrowers are moved to a standard 10-year repayment plan temporarily.
- Provides disclosures explaining payments and allows requests for recalculation due to life changes (e.g., job loss, divorce).
- Tracks progress toward forgiveness automatically, without needing borrower applications.
- Special Rules for Married Borrowers:
- Payments based only on the borrower's income if filing taxes separately or separated/unable to access spouse's income.
- Otherwise, includes spouse's income and prorates payments if the spouse has loans.
- Phase-Out of Existing Plans:
- Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) plans are restricted after 2 years: No new enrollments unless already in the plan; no re-enrollment after switching out.
- Expands ICR eligibility to include more parent PLUS loans for dependent students.
Significant Changes to Existing Law
- Amends the Higher Education Act of 1965 (HEA) by adding the SOAR plan as a permanent income-contingent option under sections like 455(d) (Direct Loans) and 428 (FFEL loans).
- Replaces broad references to "income-contingent" plans with specifics for SOAR, limiting access to older plans (PAYE and ICR) to protect the new system's rollout.
- Introduces unique features not in current plans: Tiered interest rates (5% undergrad vs. 10% others), no interest accrual on unpaid amounts, direct principal payments, and automatic forgiveness tracking.
- Broadens loan eligibility for ICR to include certain parent PLUS loans and consolidations, which were previously excluded from some income-driven plans.
- Aligns SOAR with Public Service Loan Forgiveness (PSLF) by counting similar deferments/forbearances toward qualifying payments.
Potential Impacts
- On Borrowers: Lowers monthly payments for those with incomes near or below 250% poverty (about $37,650 for a single person in 2023, adjusted annually), potentially saving thousands in interest and preventing defaults. Forgiveness timelines (10–15 years) could reduce lifetime debt, especially for undergrad-only borrowers, but higher earners may pay more over time.
- On Government Agencies: The Department of Education must implement new systems for income verification, payment tracking, and forgiveness, increasing administrative workload and costs (estimated billions in forgone revenue from lower payments and cancellations). The IRS will share more tax data, raising privacy and data-sharing concerns.
- On Citizens: Improves access to higher education by making loans more manageable, potentially boosting workforce participation among young adults and reducing wealth inequality. However, it may increase federal deficits without offsetting revenue.
- On International Relations: Minimal direct impact, though it could indirectly support U.S. higher education appeal to international students by stabilizing domestic loan systems.
Main Stakeholders Affected
- Student Loan Borrowers: Primarily low- to middle-income individuals with federal undergraduate or graduate loans, including parents with PLUS loans; benefits those in public service or facing economic hardship.
- Department of Education and Loan Servicers: Responsible for plan administration, recertification, and forgiveness; face implementation challenges.
- Internal Revenue Service (IRS): Provides income data for verifications, affecting taxpayer privacy protocols.
- Higher Education Institutions: Indirectly affected through potentially higher enrollment if loans seem more affordable, but no direct changes to lending.
- Taxpayers: Bear costs via increased federal spending on subsidies and forgiveness.
Notable Legal, Constitutional, or Political Implications
- Legal: Strengthens HEA's framework for income-driven repayment without overriding court rulings (e.g., on past forgiveness attempts); requires clear rulemaking to avoid challenges under the Administrative Procedure Act (governing federal agency actions). Expands eligible loans for ICR, potentially resolving gaps in current regulations.
- Constitutional: Aligns with Congress's spending power under Article I (taxing and borrowing for public welfare); no First Amendment or equal protection issues apparent, as it's income-neutral and available to all eligible borrowers.
- Political: Sponsored by Senate Democrats, it reflects priorities for education affordability amid rising tuition costs; could face opposition over fiscal costs in a divided Congress. If enacted, it standardizes repayment options, reducing reliance on executive actions vulnerable to policy shifts.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (17)
Sen. Kaine, Tim [D-VA], Sen. Schumer, Charles E. [D-NY], Sen. Hirono, Mazie K. [D-HI], Sen. Blumenthal, Richard [D-CT], Sen. Warren, Elizabeth [D-MA], Sen. Welch, Peter [D-VT], Sen. Gillibrand, Kirsten E. [D-NY], Sen. Padilla, Alex [D-CA], Sen. Booker, Cory A. [D-NJ], Sen. Smith, Tina [D-MN], Sen. Sanders, Bernard [I-VT], Sen. Wyden, Ron [D-OR], Sen. Kim, Andy [D-NJ], Sen. Markey, Edward J. [D-MA], Sen. Van Hollen, Chris [D-MD], Sen. Luján, Ben Ray [D-NM], Sen. Duckworth, Tammy [D-IL]
Recent Actions
- 2025-04-01: Read twice and referred to the Committee on Health, Education, Labor, and Pensions.
- 2025-04-01: Introduced in Senate
Bill Versions
- Savings Opportunity and Affordable Repayment Act — issued 2025-04-01 — PDF (24 pages)