The Department of Education has established several Income-Driven Repayment (IDR) Plans over the years, which calculate monthly payments based on income and family size, often leading to lower monthly payments for student loan borrowers.
The Biden Administration created the Saving on a Valuable Education (SAVE) Plan, the most affordable IDR plan, in August 2023 to replace the Revised Pay As You Earn (REPAYE) Plan.
7.5 million people are already taking advantage of SAVE. 4.2 million of them are paying $0 per month!
SAVE Plan Highlights
- Your monthly payment may be reduced to $0
- You may save thousands of dollars per year in payments
- Your total balance will not grow due to accrued interest as long as you make your monthly payments
- If you originally borrowed $12,000 or less and have made 10 years of payments, you may be eligible for total forgiveness already
The SAVE Plan reduces most borrowers’ monthly payment by increasing the income exempted from payment calculations from 150% to 225% of the poverty line. And beginning in July 2024, borrowers with only undergraduate loans will owe monthly payments of no more than 5% of their non-exempt income.
The SAVE Plan also stops your loan balance from growing. As long as you make your monthly payment on time, even if your payment amount is $0, your total amount owed will never increase due to interest.
However, not all student loans are eligible for the SAVE Plan.
- Unsure what type of loan you have? Visit your Student Debt Dashboard with your Federal Student Aid (FSA) ID on studentaid.gov and it will tell you your types of loans.
- As an income-driven repayment plan, monthly payments on SAVE are also considered as qualifying payments for the 120 payments required for Public Service Loan Forgiveness (PSLF). If your loan is eligible to be on SAVE and you are seeking PSLF, there is no better repayment plan to be on than SAVE.
- Those who consolidate their FFEL, Perkins, or Parent Plus loans before the Department of Education’s one-time account adjustment deadline on April 30, 2024, will also enjoy the added benefit of having previous payments count toward PSLF.
Learn More About PSLF and the One-Time Account Adjustment
How to take advantage of the SAVE Plan
Borrowers on the REPAYE Plan in 2023 were automatically switched to the SAVE Plan. All others should follow these steps to take advantage of the SAVE Plan:
STEP 1: Log in to StudentAid.gov using your Federal Student Aid (FSA) ID. If you do not have an FSA ID, you can create an account.
STEP 2: Review all available IDR plans to ensure SAVE is the best option for you. Compare payments under each IDR plan using FSA’s Loan Simulator. Be aware that defaulted loans are not eligible for repayment under IDR plans. If you are in default, take advantage of the Department of Education’s Fresh Start program to get out of default before applying for an IDR plan.
STEP 3: Apply for the SAVE Plan online or submit a paper form available through your current servicer. You will receive an email confirmation after your application is submitted. Keep in mind that your servicer may need several weeks to process your application.
STEP 4: Sign up for auto pay with your servicer. Not only will you never miss a payment, but you will also save 0.25% on your interest rate. You will still receive a reminder before each payment is made. Those who enrolled in autopay before the COVID-19 payment pause may need to reenroll.
STEP 5: Recertify your income and family size annually, even if there has been no change. If you consented to FSA accessing your tax information when applying for your IDR, FSA will automatically recertify your plan each year for you.
Married individuals may also want to discuss the SAVE Plan with a tax professional. Unlike previous IDR plans, the SAVE Plan excludes spousal income for borrowers who are married and filing separately. But make sure that this option is right for you. There may be other tax implications to consider.
More SAVE Plan benefits are coming July 2024!
Enrollees with only undergraduate loans will have their payments cut in half from 10% to 5% of income above 225% of the poverty line.
Enrollees with undergraduate and graduate loans will pay a weighted average of between 5% and 10% of their income based on the original principal balances of their loans.
But do not wait to apply for SAVE! You can benefit from it now.
Have further questions?
NEA members can consult student debt experts through the Student Debt Navigator for free, personalized advice about SAVE and assistance applying for Public Service Loan Forgiveness (PSLF).
For the latest news on student debt relief, text STUDENTDEBT to 48744. You will receive important updates and invitations to upcoming events and webinars.
Additional resources around SAVE from the U.S. Department of Education:
- Federal Student Aid’s SAVE Plan overview
- Expected SAVE Plan repayment terms by balance for undergraduate, graduate, and mixed loans
