Overview
In 2023, a new income-driven repayment (IDR) plan called SAVE (Saving on a Valuable Education) was introduced as an option for borrowers with federal student loans. The SAVE Plan provides the lowest monthly payments of any IDR plan to nearly all student borrowers and was rolled out as a replacement for REPAYE (Revised Pay As You Earn).
Eligibility
Most federal student loans are eligible for the SAVE plan, including:
- Direct Subsidized and Unsubsidized Loans
- Direct PLUS loans for graduate or professional study.
- Direct Consolidation Loan (not of direct PLUS parent loans).
Please note:
FFEL and Perkins loans are also eligible, as long as they are consolidated into a Direct Consolidation Loan. Loans taken out by parents are not eligible for the SAVE plan.
Key Changes & Benefits
While similar to REPAYE, there are a number of changes and benefits unique to SAVE that are designed to lower monthly payments based on your income and family size.
New Income Exemption
The Income Exemption has increased from 150% to 225% of the poverty line. This percentage is used to calculate Discretionary Income, upon which an individual's IDR payment amount is ultimately based. The impact of this change is that monthly payments calculated under SAVE will be lower than they were under REPAYE.
Discretionary Income Adjustments
Going into effect for 2024, for borrowers with undergraduate loans, the payment amount will be reduced from 10% to 5% of discretionary income. Borrowers who have both graduate and undergraduate loans will pay a weighted average of between 5% and 10%, based on the original principal balances of their loans.
Tax-Filing Status Changes
For married borrowers who file their taxes separately (MFS), their spouse will now be excluded when calculating the IDR payment under SAVE. Their spouse will no longer count towards family size, and their spouse's income will no longer factor into the AGI used when calculating discretionary income.
Interest Benefits
The SAVE plan eliminates 100% of unpaid interest after making a monthly payment for both subsidized and unsubsidized loans. This means that loan balances will never grow due to unpaid interest, even if the monthly interest accrued outweighs the monthly payment made.
Loan Forgiveness Terms
Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years (if all loans were taken out for undergraduate study) or 25 years (if any loans were taken out for graduate or professional study).
Monthly Payment Cap
SAVE does not have a monthly payment cap. Borrowers with higher income could see their monthly payment rise above the Standard 10-year payment amount, and would still be eligible to remain on the SAVE plan.
