Biden’s SAVE Plan – Distributional Impact Analysis

Summary: The impact of income-driven repayment (IDR) educational financing plans by income, race, and gender is not generally well understood. Our analysis estimates that approximately 43 percent of the subsidies from President Biden’s Saving on a Valuable Education (SAVE) plan will accrue to current Black student borrowers and 71 percent to current female borrowers. While lower- to middle-income student borrowers stand to gain the most, we estimate that about a fifth of the benefits will go to households in the top 20 percent of the income distribution, and borrowers with graduate-level education who benefit from the SAVE plan tend to experience the highest savings on average.

Key Points

• Approximately 43 percent of the total benefits from the SAVE plan would accrue to Black borrowers with outstanding student loan debt. For future borrower cohorts, about 25 percent of the benefits are expected to go to Black borrowers.

• Female borrowers are expected to receive about 70 percent of the benefits from the SAVE plan, with current borrowers gaining 71 percent and future cohorts accruing 68 percent.

• Current student loan borrowers in the top quintile of the income distribution are estimated to receive 24 percent of the total SAVE subsidies, while borrowers from the top quintile in future cohorts are expected to gain 18 percent.

• While the SAVE plan focuses on benefiting undergraduate borrowers, those with graduate loans are also receiving substantial subsidies due to their significantly larger debt amounts. Student borrowers with graduate loans receive an average subsidy of $6,500 to $8,800 per beneficiary.

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This analysis was produced by Junlei Chen and Jesús Villero under the direction of the faculty director, Kent Smetters. Mariko Paulson prepared the brief for the website.