What is Saving on a Valuable Education (SAVE) Plan ?


In August 2023, the Biden government introduced the SAVE plan. The SAVE Plan replaces the REPAYE Plan, offering borrowers lower monthly payments and an end to interest growth.

Like other income-driven repayment (IDR) plans, the Saving on a Valuable Education (SAVE) Plan determines your monthly payment amount depending on your income and family size. The SAVE Plan offers nearly all student borrowers the lowest monthly payments of any IDR plan. Student loan payments will be halved under the SAVE Plan, and for some borrowers, there may be no payment necessary.

The Revised Pay As You Earn (REPAYE) Plan was replaced by the SAVE Plan. The advantages of the new SAVE Plan are instantly available to borrowers on the REPAYE Plan. Borrowers on REPAYE are automatically enrolled in the SAVE Plan; however, borrowers on other payment plans can switch through the Federal Student Aid website or by getting in touch with their student loan servicer.

In the SAVE plan, monthly payments are capped at 5% to 10% of discretionary income, and loan balances are forgive after 20 or 25 years. A new method for determining discretionary income would allow an estimated 1 million low-income borrowers to make monthly student loan payments of $0.

How the SAVE Repayment Plan Works ?


In comparison to other Income-Driven Repayment (IDR) programs, the SAVE plan will reduce payments on undergraduate loans by half, guarantee that borrowers' balances will never increase as long as they make their minimum payments, and protect more of a borrower's income for essential requirements. 

A single borrower making less than $15 per hour is exempt from making payments under the Saving on a Valuable Education (SAVE) program. In comparison to other IDR plans, borrowers earning more than that would save more than $1,000 a year on their payments. 

Existing REPAYE plan borrowers will be immediately enrolled in the SAVE plan and their payments will adjust without further action from them. Borrowers may encounter confusion between the terms REPAYE and SAVE while the Department transitions. By going to StudentAid.gov/IDR, borrowers can sign up for the SAVE/REPAYE plan right away.

In contrast to other IDR plans, SAVE plan limits payments for undergraduate loans to 5% of discretionary income. If you have graduate loans, your monthly payment might be up to 10% of your discretionary income or your student loan balances weighted as an average.

From October 1, 2023, to September 30, 2024, there is an extended grace period that guarantees that borrowers who skip payments won't experience any harm to their credit scores or loan status. Therefore, you won't have to be concerned about going into default on your student loan debt at this time.

Benefits of Saving on a Valuable Education Plan


The SAVE Plan offers borrowers a number of new advantages. The alterations listed below will take effect this summer. In July 2024, additional benefits start to apply.

SAVE Plan Changes

Meaning

The SAVE Plan raises the income exemption from 150% to 225% of the poverty line, which dramatically lowers monthly payments.

Compared to all other income-driven repayment programs, the new plan has the potential to substantially lower your monthly payment amount. Your monthly payment is determined by your discretionary income, which is the sum of your adjusted gross income (AGI) plus 225% of the family size-appropriate poverty level set by the U.S. Department of Health and Human Services.

 

Therefore, if you are a single borrower making less than $32,800 annually or a family of four making less than $67,500 annually (amounts are higher in Alaska and Hawaii), you will not be required to make loan payments. Over these thresholds, borrowers will save at least $1,000 annually relative to the existing income-driven repayment arrangements.

Spousal income for borrowers who are married but file separately is excluded from the SAVE Plan.

With this modification, your spouse is no longer required to cosign your IDR application.

After a scheduled payment is made, the SAVE plan completely eliminates all outstanding interest on both subsidized and unsubsidized loans.

Your loan balance won't increase because of accumulated interest if you make your monthly payments. For instance, if you had a $30 payment and $50 in interest accrues each month, the remaining $20 would not be assessed.

Eligible Loans for the SAVE Plan


Loans that qualify under the SAVE Plan include:
  • Direct Unsubsidized Loans
  • Direct Subsidized Loans
  • Direct PLUS Loans (made to graduate or professional students)
  • Direct Consolidation Loans (that did not repay any PLUS loans made to parents)

To be qualified for repayment under the SAVE Plan, the following loans first need to be consolidated into a Direct Consolidation Loan:
  • Federal Perkins Loans
  • Unsubsidized Federal Stafford Loans (from FFEL Program)
  • Subsidized Federal Stafford Loans (from FFEL Program)
  • FFEL PLUS Loans (made to graduate or professional students)
  • FFEL Consolidation Loans (that did not repay any PLUS loans made to parents)

Ineligible Loans for the SAVE Plan


Loans that are not eligible for SAVE Plan repayment include:
  • Any loan that is currently in default
  • Direct PLUS Loans and FFEL PLUS Loans made to parents
  • Direct Consolidation Loans and FFEL Consolidation Loans that repaid PLUS loans made to parents

Monthly Payment under the SAVE Plan 


Your monthly cost for the SAVE Plan is determined by your income and family size. Your monthly payment will be zero starting this summer if your yearly income is $32,800 or less, or about $15 per hour. In comparison to other IDR plans, if you earn more than that, you might save at least $1,000 year.

Borrowers on the SAVE Plan will have their undergraduate loan payments halved (from 10% to 5% of income above 225% of the poverty line) as of next summer. According to the initial principal balances of their loans, borrowers with undergraduate and graduate loans will pay a weighted average of between 5% and 10% of their income.

Who Qualifies for SAVE Plan ?


Any Direct Loan borrower who has a loan type that qualifies may select SAVE plan. It is possible for students with federal student loans to apply for an IDR plan, which gives them the option to join in SAVE. However, this program will not accept applicants who have parent PLUS loans or loans owned by commercial lenders.

How to Qualify for SAVE Plan ?


If you borrowed $12,000 or less and have paid off your student loans over the course of 10 years, you might be eligible for forgiveness under the SAVE plan.

Higher principal balance borrowers may also be eligible if they agree to make an additional year of payments for every extra $1,000 borrowed. Therefore, if you borrowed $14,000, for instance, your loans might be discharged after 12 years of payments.

How to Apply for the SAVE Plan ?


To apply for the SAVE Plan, use the Income-Driven Repayment (IDR) application. You can choose to have your loan servicer put you on the payment schedule with the lowest monthly payment (this will usually be SAVE plan).

On the My Account page of StudentAid.gov, you can find out what plan you are presently enrolled in if you are unsure.

When to Apply for the Saving on a Valuable Education (SAVE) Plan ?


The SAVE Plan enrollment option is now available on the updated IDR application. You will be automatically enrolled in the SAVE Plan if you have recently applied or are currently a member of the REPAYE Plan. No new applications or requests for plan changes are required. 

Check to discover if you are on the REPAYE Plan if you are currently enrolled in an IDR plan. View your loans by logging onto StudentAid.gov, going to your My Aid page, and scrolling down. Each loan will have a repayment schedule listed. 

You will automatically be registered in the SAVE Plan later this summer if you notice that you are currently a member of the REPAYE Plan. Even if you're on a different repayment schedule, you can sign up for the SAVE Plan. Create an account on StudentAid.gov right away if you don't already have one.

What Benefits of the SAVE Plan will be Available in Next Year ?


Additional benefits under the SAVE Plan will take effect in July 2024. These extra perks will probably lower payments even more and make repayment easier to handle. The following are some of the advantages:

1) Reduced from 10% to 5% of income beyond 225% of the poverty line, payments on student loans will be slashed in half. According to the initial principal balances of their loans, borrowers with undergraduate and graduate loans will pay a weighted average of between 5% and 10% of their income.

2) Consolidating borrowers will maintain their progress in the forgiveness process. Based on the principal balance of the loans being consolidated, a weighted average of payments that count towards forgiveness will be awarded to them.

3) If the borrower has given permission for the US Department of Education to securely access their tax information, they will be automatically enrolled in IDR if their loan is 75 days past due.

4) For certain periods of deferment and forbearance, borrowers will automatically be given credit towards forgiveness.

5) All other periods of deferment or forbearance may be made up with additional "catch-up" payments that the borrower can apply towards credit.

6) After ten years of payments, borrowers with original principle balances of $12,000 or less will be forgiven of any residual balance. The maximum repayment term before forgiveness increases by one year for each additional $1,000 borrowed. After 12 years, for instance, if your initial principle balance is $14,000, you will be pardoned. Both payments paid in the past (before to 2024) and in the future will contribute towards these maximum forgiveness periods.