After the Supreme Court struck down President Biden’s student loan cancellation plan, President Biden announced a number of new actions to help student loan borrower. One of those actions was rolling out a new, more affordable student loan payment plan, called SAVE.
While some of the benefits of this new plan will not be available until next year (July 2024), three important aspects of the plan will become available to borrowers later this summer. Below, we explain what’s different about the SAVE plan from all the other payment plans, who is eligible for the new plan, what benefits of the plan will be available this summer, what parts of the plan will become available in July 2024, and how you can enroll.
How is the SAVE plan different?
The SAVE plan is the newest Income- Driven Repayment (IDR) plan, and it will replace the current REPAYE plan. IDR plans all work in the same way: they set a borrower’s monthly payment amount based on how much the borrower makes and how many people are in their family, and then cancel any remaining debt after a certain number of years in repayment (generally 20 or 25 years). They are intended to be a more affordable option for borrowers who can’t afford payments on a standard 10-year payment plan.
Compared to the other IDR plans, the SAVE plan will:
- offer much lower monthly payments,
- shorten the number of years some borrowers will need to make payments,
- prevent balances from increasing while borrowers are making payments
- reduce the amount of interest and total amount that most borrowers will pay on their loans.
And, under the SAVE plan, more low-income borrowers will be eligible for $0 monthly payments.
Who is eligible for the new SAVE plan?
Borrowers who have Direct Loans for their own education are eligible for the new SAVE plan. This includes most student loan borrowers. Unfortunately, Parent PLUS loans – federal loans taken out by parents for their children’s education – are not eligible for the SAVE plan.
Other federal student loan types, including FFEL Loans and Perkins Loans, are only eligible for the SAVE plan if the borrower first consolidates their loans into a new Direct Consolidation Loan. More information about consolidating federal loans into a Direct Consolidation Loan can be found here.
Not sure what type of loans you have? Start here.
What parts of the SAVE plan will be available this summer before payments resume?
Three important parts of the SAVE Plan will become available this summer.
First, the new SAVE plan will decrease the amount of money most borrowers will have to pay each month, as compared to the other available IDR plans. The SAVE plan increases the amount of income that will not be included when the Department of Education calculates a borrower’s monthly payments. The Department excludes this amount so that it can go towards borrowers’ necessary living expenses. Under the SAVE plan, the amount of income that will be protected from payments will increase from 150% of the Federal Poverty Line to 225% of the Federal Poverty Line. People who make less than 225% of the Federal Poverty Line for their family size will have a $0 monthly payment. For people who make more than 225% of the federal poverty line, until July 1, 2024, monthly payments will be 10% of only that portion of the borrower’s income above that amount. The Department estimates that these changes will make half a million people eligible for $0 payments, and will save other borrowers at least $1,000 a year.
Here are the 2023 income limits for 225% of the Federal Poverty Line:
Second, the Department will stop charging any borrower enrolled in the SAVE plan interest that is not covered by their monthly payment. That means that unlike other IDR plans, borrowers will not see their total loan balance increase while making payments in the plan.
Third, the Department will stop counting spousal income for married borrowers who file their taxes separately in the SAVE plan. This is a change from the current REPAYE plan, which counted spousal income even if the borrower filed their taxes with their spouse, and will result in lower monthly payments for some married borrowers who file taxes separately.
What additional benefits of the SAVE plan will become available in July 2024?
The SAVE plan will reduce most borrowers’ monthly payments even more when it is fully implemented next summer by cutting payments in half on undergraduate loans. Beginning on July 1, 2024, borrowers enrolled in the SAVE plan will owe the following monthly payments:
- 5% of a borrower’s income above 225% of the Federal Poverty Line (FPL) if they only have undergraduate loans (ie, monthly payment = 0.05 x (monthly income – 225% FPL for the month);
- 10% of a borrower’s income above 225% of the Federal Poverty Line if they only have graduate loans;
- A weighted average of between 5% and 10% of the borrower’s income above 225% if they have both undergraduate and graduate loans.
After July 1, 2024, the SAVE/REPAYE plan will also change how long some borrowers will need to be in repayment before the Department cancels any remaining balance on their loan. If a borrower originally borrowed $12,000 or less on all loans enrolled in the SAVE plan, they will receive cancellation after 10 years in repayment. ED will add an additional year of repayment for each additional $1,000 borrowed above that level, up to a maximum of 20 or 25 years. People who borrowed $22,000 or more in only undergraduate loans will receive cancellation at 20 years, whereas people who borrowed at least one graduate loan and borrowed $27,000 or more will receive cancellation at 25 years.
There will also be a number of additional improvements to SAVE and the other IDR plans, including new options to allow borrowers to share their tax information with the Department of Education going forward to make it easier to enroll and stay enrolled in an IDR plan without having to fill out an application each year. For more details on these changes, see here.
How can I enroll in the SAVE plan?
All borrowers who are currently enrolled in the REPAYE plan, or who enroll in REPAYE going forward, will automatically be enrolled in the SAVE plan. This is because SAVE is replacing REPAYE.
You can enroll in SAVE now by completing an IDR application on studentaid.gov/idr and selecting either REPAYE or SAVE.
All borrowers who enroll in the REPAYE plan will be automatically enrolled in the SAVE plan once it becomes available later this summer/fall.
You can also enroll in the SAVE plan by calling your student loan servicer. When you call, you should request to be enrolled in the SAVE or REPAYE plan – it shouldn’t matter which of these names you or they use. Your servicer will ask you about your family size and how much money you make each year. If you enroll over the phone, it is a good idea to doublecheck to make sure that you were properly enrolled in the SAVE plan by logging into your studentaid.gov account a couple weeks after you enrolled. If you were correctly enrolled, your account will show you as enrolled in the REPAYE (or SAVE) plan. If not, you should resubmit your IDR application by logging into your account and completing an IDR application on studentaid.gov/idr.