How to Enroll in Biden’s New SAVE Student Loan Repayment Plan 2024?

Estimated read time 16 min read

The Biden administration has formally started a new federal SAVE Student Loan Repayment Plan, and officials are asking borrowers to enroll before payments restart in a few weeks.

Saving on a Valuable Education (SAVE) is an income-driven repayment plan, which means that expenses are related to a person’s income rather than the amount due. The timing is deliberate: the rollout occurs just as federal student loan payments are slated to start this September after a more than three-year hiatus.

The newest income-driven repayment (IDR) plan is the Saving on a Valuable Education (SAVE) Plan. The SAVE Plan, like other IDR plans, estimates your monthly payment amount depending on your income and family size. Furthermore, the SAVE student loan repayment plan offers unique features that will reduce payments for many borrowers.

The Revised Pay As You Earn (REPAYE) Plan was replaced by the SAVE student loan repayment plan. Borrowers on the REPAYE Plan are automatically eligible for the new SAVE student loan repayment Plan.

Who qualifies for SAVE Student loan Repayment Plan?

SAVE Student loan Repayment Plan
SAVE Student loan Repayment Plan

Borrowers with federally owned loans, such as direct subsidized, unsubsidized, or consolidated loans, may be eligible for SAVE. SAVE student loan repayment plan will take the place of the present income-driven repayment program known as the Revised Pay as You Earn (REPAYE). Borrowers who are already on the REPAYE plan will be enrolled in the SAVE plan automatically.

Borrowers with federal undergraduate or graduate loans, both current and future, are eligible. Parents who have taken out Parent PLUS loans are not eligible to participate in the new arrangement.

SAVE is intended to safeguard more of a borrower’s income from being swallowed up by necessary monthly loan payments than the present Revised Pay as You Earn (REPAYE) plan. It will also cover unpaid interest on a borrower’s account, preventing loan balances from increasing as long as monthly payments are made on schedule. In a statement, U.S. Secretary of Education Miguel Cardona referred to the plan as “the most affordable repayment plan ever created.”

Following the release of a beta version last month, the department announced Tuesday that the modified income-driven application tool, through which borrowers can apply for the new plan, is now fully operational.

Fact About New Student Loan Repayment Plan

  • Because the SAVE Plan is an IDR plan, your monthly premium is determined by your income and family size.
  • When compared to other IDR plans, the SAVE Plan lowers payments for practically everyone since payments are based on a lesser portion of your adjusted gross income (AGI).
  • The SAVE Plan includes an interest benefit: if you make your full monthly contribution but it is insufficient to meet the accrued monthly interest, the government will cover the difference. This means that the SAVE Plan keeps your debt from rising as a result of unpaid interest.
  • More SAVE aspects will take into effect in the summer of 2024, lowering payments even further for students with undergraduate loans.
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How is SAVE Student Loan Repayment Plan different from REPAYE?

More people will be eligible for no-interest loans.

Borrowers with discretionary income of 225% or less of the federal poverty requirements are exempt from making payments under the SAVE program. For an individual, that equates to around $15 (or less) per hour or $32,800 (or less) per year. A family of four must earn $67,500 or less per year.

The REPAYE program has an income ceiling of 150% of the poverty line for qualifying.

Others who do not qualify for $0 payments may have their payments reduced by half.

Most borrowers with discretionary income above 225% of the federal poverty line will have their monthly payments drastically reduced starting in July. In particular, payments on undergraduate loans will be 5% of a borrower’s discretionary income (down from 10% under the REPAYE scheme). Graduate loan borrowers will pay 10% of their discretionary income.

Payments will be weighted if you have both undergraduate and graduate debt.

The SAVE Student Loan Repayment Plan strategy will specifically:

  • Reduce your undergraduate loan payments by half. Undergraduate loan borrowers will have their payments lowered from 10% to 5% of their discretionary income. Those with undergraduate and graduate loans will pay a weighted average of 5% to 10% of their income dependent on their loan principal balances.
  • Bring many borrowers’ monthly loan payments to zero. The monthly payment amount for a borrower is determined by their discretionary income, which is defined under the SAVE student loan repayment plan as the difference between their AGI and 225% of the US Department of Health and Human Services Poverty Guideline amount for their family size. This means that a single borrower earning around $15 per hour will not be required to make any monthly payments. Borrowers earning more than that amount would save approximately $1,000 per year in payments as compared to alternative IDR programs. According to the Department of Education, more than 1 million extra low-income borrowers will be eligible for a $0 payment. This will allow them to prioritize food, rent, and other essential necessities over loan payments.
  • Ensure that borrowers’ balances never rise as long as they make their required payments on time. The Department of Education will discontinue charging any monthly interest that is not paid by the borrower’s SAVE student loan repayment plan payment. As a result, borrowers who pay their debts on time will no longer see their payments expand due to unpaid interest. For example, if a borrower has $50 in monthly interest and their payment is $30 under the new SAVE plan, the remaining $20 will not be charged as long as they make their $30 monthly payment. According to the Department of Education, 70% of borrowers who were on an IDR plan before to the payment halt will benefit.
  • Allow borrowers with low balances to receive early forgiveness. IDR plans require all borrowers, even those who only attended school for one term, to repay their loans for at least 20 or 25 years before any outstanding sum is forgiven. Borrowers with original principal balances of $12,000 or less will be forgiven after 120 payments (the equivalent of 10 years in repayment) under the SAVE student loan repayment plan . For every $1,000 borrowed above that amount, the plan adds 12 payments (equal to one year of payments) for a total of 20 or 25 years. For example, if a borrower has a $14,000 original principle sum, they will be forgiven after 12 years. Payments made earlier (before 2024) and those made in the future will be counted.

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What You Need to Know About SAVE Student Loan Repayment Plan

Need to Know About SAVE Student Loan Repayment Plan
Need to Know About SAVE Student Loan Repayment Plan

Borrowers will benefit from a number of new features under the SAVE Plan. The following modifications went into effect in the summer of 2023. Additional benefits will be implemented in July 2024. To learn more about the current SAVE student loan repayment plan , expand the sections below.

Reduced Payments Due to Increased Income Exemption

By extending the income exemption from 150% to 225% of the poverty line, the SAVE student loan repayment plan reduces monthly payments. This means that, when compared to other IDR plans, SAVE might significantly reduce your monthly payment amount.

Your monthly payment amount is determined by your discretionary income, which is the difference between your AGI and 225% of the US Department of Health and Human Services Poverty Guideline amount for your family size. Examples can be seen in the table below.

Because your necessary monthly payment is a proportion of your discretionary income, if your discretionary income is zero, your payment will be zero. For example, if your annual salary is equal to or less than $32,800 and your family size is only yourself, your discretionary income is $0 and your monthly payment will be $0. The same is true for a family of four earning $67,500 or less per year.

The interest benefit prevents your balance from growing.

After you make a scheduled payment, the SAVE student loan repayment plan eliminates 100% of the remaining monthly interest on both subsidized and unsubsidized loans. This implies that if you make your monthly payment, your loan balance will not increase as a result of unpaid interest that has accrued since your last payment.

For example, if you have a $30 payment and $50 in interest accumulates each month, the remaining $20 is not charged.

If you file your taxes separately, your spouse’s income is excluded.

For married borrowers who pay separate taxes, the SAVE student loan repayment plan excludes spousal income. Previously, regardless of your tax filing status, your spouse’s income was included in the total income used to establish your monthly payment amount on the REPAYE Plan. If you file separately under the new SAVE Plan, your monthly payment amount will be based solely on your income. This modification also eliminates the necessity for your spouse to cosign your IDR application, making the application procedure simpler.

Unlock Your Financial Future with the SAVE Plan Calculator for Student Loans

How To Apply SAVE Student Loan Repayment Plan?

How To Apply SAVE Student Loan Repayment Plan?
How To Apply SAVE Student Loan Repayment Plan?

To apply for the SAVE Plan, use the IDR application.

If you were previously engaged in the REPAYE Plan, you have been automatically enrolled in the SAVE student loan repayment plan . There is no need to reapply or request a plan change. Learn how to determine which plan you are on.

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Examples of SAVE plan expected monthly payments

Annual incomeFamily size
 12345
$60,000$227$130$34$0$0
$50,000$143$47$0$0$0
$40,000$60$0$0$0$0
$30,000$0$0$0$0$0
$20,000$0$0$0$0$0
$10,000$0$0$0$0$0
$0$0$0$0$0$0

Which Loans Are Eligible For SAVE Student Loan Repayment Plan?

EligibleEligible if Consolidated into a Direct Consolidation LoanIneligible
Direct Subsidized LoansDirect Unsubsidized LoansDirect PLUS Loans made to graduate or professional studentsDirect Consolidation Loans that did not repay any PLUS loans made to parentsSubsidized Federal Stafford Loans (from the FFEL Program)Unsubsidized Federal Stafford Loans (from the FFEL Program)FFEL PLUS Loans made to graduate or professional studentsFFEL Consolidation LoansFederal Perkins LoansDirect PLUS Loans made to parentsDirect Consolidation Loans that repaid PLUS loans made to parentsFFEL Program Loans (some types can become eligible if consolidated)Federal Perkins Loans (can become eligible if consolidated)Any loan that is currently in default

If your loans are in default, you may be eligible for the Fresh Start initiative, which allows you to simply get your loans back on track. Signing up and enrolling in an affordable repayment plan, such as the SAVE student loan repayment plan , with payments as low as $0 per month is free and takes 10 minutes or less.

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How much will I have to pay each month?

Your monthly payment is calculated by the SAVE student loan repayment plan depending on your income and family size. If you earn $32,800 or less per year (about $15 per hour), your monthly payment will be $0, and even if you earn more, you’ll save at least $1,000 per year compared to what you would have paid under the REPAYE Plan.

save repayment plan student loans
Source : studentaid.gov

Borrowers on the SAVE student loan repayment plan will have their undergraduate loan payments slashed in half starting next summer (from 10% to 5% of income exceeding 225% of the poverty line). Borrowers with undergraduate and graduate loans will pay a weighted average of 5% to 10% of their income based on the initial principal balances of the loans they took out to attend school.

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Pros and Cons About SAVE Student Loan Repayment Plan

Pros and Cons About SAVE Student Loan Repayment Plan
Pros and Cons About SAVE Student Loan Repayment Plan

The Department of Education launched a new repayment scheme called Saving on a Valuable Education (opens in a new tab) in July 2023. The plan offers the most favorable monthly payment formulas and minimizes unpaid interest buildup, but for some borrowers, it may result in larger payments or unforeseen effects. Our whole analysis can be found on this page.

Protected Income

Because the protected income threshold is higher with SAVE student loan repayment plan, most borrowers have lower monthly payments. The amount of income protected from consideration under SAVE is 225% of the federal poverty standard, compared to 150% for IBR and PAYE and 100% for ICR.

Interest Accrue

Borrowers will not accumulate unpaid interest under SAVE student loan repayment plan. If you pay your monthly payments on time, your loan balance will not increase due to unpaid interest. Borrowers in this new plan will no longer see their loans grow over time, lowering their chances of IDR, PSLF, and public service or lower-paying jobs.

Some existing IDR plans include limited interest subsidies. For example, under PAYE and IBR, the Department of Education subsidizes unpaid interest on subsidized loans for the first three years of plan participation. However, under SAVE student loan repayment plan, this benefit is available for the duration of your loan and applies to all loan types.

If you switch to SAVE student loan repayment plan and have unpaid interest on your loans, the interest will not be erased. It will either continue to be unpaid interest or If you switch from the IBR plan to SAVE, it will capitalize and be added to your principal balance.

Borrowers who are married can also benefit.

Under SAVE, married borrowers will be able to file taxes separately and have their monthly payment amount determined by the borrower’s individual income. This differs from the current REPAYE model, which considers combined income regardless of a borrower’s tax filing status.

A borrower who pays taxes individually will no longer have their spouse included in their family size under new restrictions. Some married borrowers’ monthly payments may increase as a result of these new requirements.

Payment Cap

IBR and PAYE require borrowers to demonstrate “partial financial hardship,” which is determined by their debt-to-income ratio. The partial financial hardship requirement limits your monthly IBR and PAYE payments. Your monthly payment under those programs can never be more than the Standard 10-year repayment plan amount. If your debt-to-income ratio hits those thresholds, you will be switched from IBR / PAYE to the Standard plan.

There is no monthly payment cap with SAVE student loan repayment plan. That means that if your salary is high and your loan debt is low, your payment may exceed the Standard 10-year plan amount. SAVE may result in higher monthly payments for some borrowers than the Standard 10-year plan. If something like this happens to you, you can always Return to the Standard plan.

SAVE plan apply to graduate and undergraduate loans

The majority of the SAVE student loan repayment plan advantages apply to both graduate and undergraduate loans. There are, however, a few significant variances.

Beginning in July 2024, borrowers with undergraduate loans will see their monthly payments slashed even further. Borrowers with undergraduate loans will only pay 5% of their discretionary income toward their loans each month under SAVE student loan repayment plan. Graduate loan borrowers will pay 10%. Borrowers who have a mix of undergraduate and graduate loans will pay a weighted average rate. Compare this to the 10% that PAYE borrowers pay, the 10-15% that IBR borrowers pay, and the 20% that ICR borrowers pay.

Loan forgiveness more quickly

If a borrower seeks forgiveness via an IDR plan (rather than a 10-year PSLF or paying off their loans), the new SAVE student loan repayment plan will take 20-25 years. Borrowers with undergraduate loans who participate in the SAVE scheme can have their loans erased after 20 years of payments. Graduate loan borrowers will be required to make payments for a period of 25 years.

Compare this to PAYE’s universal 20-year forgiving period. IBR, REPAYE, and ICR all require a minimum of 25 years. As a result, PAYE may be a preferable alternative for someone who plans to take advantage of IDR forgiveness after 20 years.

Eligibility Limitations

There are no eligibility requirements for SAVE. Borrowers with graduate or undergraduate loans, as well as subsidized or unsubsidized loans, are welcome to participate. Borrowers of all ages and economic levels are welcome to participate.

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How to sign up for SAVE Student Loan Repayment Plan?

  • Transition to REPAYE. If you are already registered in the REPAYE plan, you will be immediately enrolled in SAVE and your payments will be adjusted.
  • SAVE the program. If you haven’t already applied for an income-driven repayment plan, visit the Department of Education’s Federal Student Aid website to learn more about SAVE and apply. You may check the status of your application on your account dashboard once you apply.
  • If your loans are in default, eligible borrowers can reinstate them and join in the SAVE program. See the Fresh Start program of the U.S. Department of Education.
Apply Now

You can also visit Investingdrone’s student loan resource page to get a hold on your student loans and understand how much you owe, who your loan servicer is, and what your repayment choices are.

The author’s bio: SAHIL LUTHRA is an InvestingDrone senior editor. In his 30 years of print and digital media career, he has worked for the Los Angeles InvestingDrone Post News Service, Travellingknowledge.com, and Dogclub24.com. Most recently prior… Continue reading.

More Questions and Answers about SAVE Student Loan Repayment Plan

When do I need to apply for SAVE in order for the adjustment to appear on my first bill?

Borrowers on the REPAYE Plan will have their monthly payments automatically adjusted to the new SAVE Plan before payments resume. Borrowers who apply for the SAVE Plan or other IDR plans will see their new payment amount before submitting their application, and it will be shown on your servicer’s website when your first bill is delivered. Most SAVE Plan applicants can expect their next payment to reflect their SAVE amount, but applicants should apply as soon as possible.
After you apply, go to your account Dashboard on StudentAid.gov to monitor the status of your application.

Is the Save Plan capable of forgiving student loans?

A second significant reform that will take effect in July 2024 is loan forgiveness. Borrowers with original loan balances of $12,000 or less will have their loan balances erased after 10 years of repayments, rather than 20 years, under the SAVE plan. Borrowers with relatively higher amounts also win.

What exactly is a SAVE Student Loan Repayment Plan?

By extending the income exemption from 150% to 225% of the poverty line, the SAVE Plan reduces monthly payments. This means that, when compared to other IDR plans, SAVE might significantly reduce your monthly payment amount.

Who is eligible for the saving repayment plan?

People who have federal loans made directly by the government for their own education, as well as those who combine their loans under the now-defunct Federal Family Education Loan Program, are eligible for the plan. People with Parent Plus loans, on the other hand, are barred from participating in the new arrangement.0

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