S. 1220 — Savings Opportunity and Affordable Repayment Act

This section amends the Higher Education Act of 1965 to (1) add the new Savings Opportunity and Affordable Repayment (SOAR) plan—available beginning 180 days after enactment—as an income contingent repayment option for Federal Family Education Loans (FFELs) under §428(b)(9)(A) and FFEL consolidations under §428C(c)(2)(A); (2) revise Direct Loan income contingent repayment under §455(d)(1)(D) to prescribe payments over up to 25 years (excluding Federal Direct PLUS Loans for dependent students, except as provided), explicitly including SOAR beginning 180 days after enactment; and (3) phase out the Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) plans two years after enactment by (A) limiting PAYE to borrowers with eligible loans and partial financial hardship who initially enter before that date or are already enrolled prior, with no re-enrollment permitted after switching plans; (B) limiting ICR similarly to borrowers with eligible loans who enter or are enrolled before that date, with no re-enrollment after switching, and expanding ICR-eligible loans to include certain PLUS and consolidation loans for dependent students; and (4) insert new §493E to define SOAR terms, including eligible loans (FFELs or Direct Loans) and monthly payment obligations based on adjusted gross income. (As background, income-driven repayment plans cap federal student loan payments as a percentage of a borrower's discretionary income, with forgiveness of remaining balances after 20-25 years; these changes replace PAYE and ICR—which serve over 8 million borrowers—with SOAR for new entrants after two years. Thus, current PAYE/ICR users may continue but face re-enrollment barriers.)