(Arkansas News Service) A new student-loan forgiveness plan could lower monthly bills and reduce the amount these borrowers have to pay back over the lifetime of their loans.

Coloradans hold $28.5 billion of the more than $1.7 trillion in U.S. student loan debt.

Kristin McGuire, executive director of the nonprofit group Young Invincibles, said President Joe Biden's new SAVE plan - which stands for Saving on a Valuable Education - would begin with income-based repayment amounts. But it hasn't been finalized yet, and McGuire said it will most likely take more time for people to see their loans forgiven.

"If you are currently in the plan called the REPAYE plan, you will automatically move over to the new SAVE plan," she said. "So, when we were looking for widespread cancellation, we were looking for something that would be swift. Working through negotiated rulemaking - that's the name of the process - will take anywhere from eight months on, to past a year."

The original debt-forgiveness plan was struck down by the U.S. Supreme Court, which ruled in June that the Biden administration overstepped its authority in trying to cancel or reduce student loan debt.

If the new SAVE plan goes into effect as written, McGuire said the amount of discretionary income used to calculate payments will be reduced from 10 percent to 5 percent. So, in theory, some borrowers would see their loan payments cut in half. 

"The plan eliminates 100 percent of remaining interest if your minimum payment doesn't cover your interest," she said. "So, for example, I'm a student loan borrower, I borrowed $20,000. I currently owe $50,000 - that's because my minimum payment never covered the interest as it accrued."

McGuire added that it's important to know that college can still be affordable, as there are still many pathways to higher education - and research shows individuals with college degrees have higher earnings capacity over their lifetime.

"In communities that typically lack access to generational wealth - typically Black communities, Latino communities, first-generation college students," she said, "college is still the number one way to create that generational wealth."

She recommended that people visit StudentAid.gov for information on the SAVE plan. The Department of Education will hold a virtual public hearing to discuss the rulemaking agenda July 18.

Support for this reporting was provided by Lumina Foundation.