SAVE Repayment Plan Offers Low Monthly Payments, Less Paperwork

Student loan borrowers have struggled with inflation and stagnant wages for years. Many have trouble keeping up with the bills. Adding a student loan payment just ups the difficulty.

That’s why the Department of Education (ED) created the Saving on a Valuable Education (SAVE) Repayment Plan. Compared to other plans, SAVE offers extremely low monthly payments and a simplified application process. As a new program, it’s continuing to evolve with more benefits to be introduced throughout Summer 2024.

What is the SAVE Repayment Plan?

SAVE is one of several Income-Driven Repayment (IDR) plans. As the name suggests, IDR plans tie your monthly payment amount to your total annual income. SAVE replaced the former REPAYE Plan in Fall 2023. Borrowers enrolled in REPAYE were automatically put on the SAVE Plan.

The SAVE Repayment Plan provides borrowers four major benefits:

1. Lower monthly payments – SAVE offers the lowest monthly payments of any IDR plan. If you’re single and make $32,800 or less, your payments will be zero dollars. Even if you make well above that amount, your total payments should drop by $1,000 per year compared to other IDR plans. ED offers this example of what a typical borrower might pay.
2. Simplified application and recertification process – With your permission, ED will pull your income and family status straight from your IRS data. That makes applying easy and automates your annual recertification. As your income rises or falls year-to-year, your monthly payment will adjust to match. You’ll receive a notice each year updating you on the change.

3. Shortened path to loan forgiveness – Other IDR plans offer forgiveness after 20 or 25 years of payments. SAVE reduces that time to 10 years for borrowers who originally borrowed $12,000 or less. On February 21, 2024, the White House announced the first batch of nearly 153,000 SAVE enrollees were forgiven their remaining debt. That number should rise as more borrowers meet the criteria for forgiveness.

   Be aware that SAVE’s path to forgiveness extends one year for every $1,000 borrowed beyond $12,000. The maximum time a borrower needs to make payments is 20 years regardless of how much they owe. For example:

   • Daniel borrowed $13,000 and will be eligible for loan forgiveness after 11 years
   • Ava borrowed $16,000 and will be eligible for forgiveness after 14 years
   • Hannah borrowed $30,000 and will be eligible after 20 years

4. Limits on accumulated interest – On the SAVE Plan, your monthly accrued interest is capped by the size of your monthly payment. For example, if your payment is $30, you can only be charged $30 in interest. Your total debt stays the same.

   The only catch is that you must make your monthly payment. If you don’t, you’ll be charged the full amount of accrued interest. The best way to avoid this trap is by setting up automatic payments through your loan servicer.

   Other IDR plans don’t cap accrued interest. If your account accrues $50 in interest each month and your monthly payment is only $30, your account balance grows by $20. This traps many borrowers in a cycle of ever-increasing debt.

Who Should Apply for the SAVE Repayment Plan?

For many borrowers, the SAVE Plan offers superior repayment terms. That doesn’t mean it’s right for everyone.

SAVE may be a good match if you:

• Can’t afford your current monthly payments – SAVE was specifically designed to help people stay current on their student loans during financially difficult periods.

• Need financial flexibility – If your monthly budget is uncomfortably tight, securing a lower payment through the SAVE Plan can give you room to breathe.

• Are already on an IDR plan – If your loans are on a different IDR plan, you may prefer SAVE’s terms. It can lower your monthly payments, and will eliminate the hassle of recertifying for the plan every year. The path to loan forgiveness is also much shorter than existing IDR plans.

If you were enrolled in a REPAYE Plan, your loans should have been automatically converted to the SAVE Plan. If you weren’t notified of this change, log in to your Federal Student Aid (FSA) account on StudentAid.gov to check out what plan you’re currently on.

Who Shouldn’t Apply for the SAVE Repayment Plan?

Borrowers who can easily afford payments through the Standard Repayment Plan* should probably avoid SAVE. The Standard Plan guarantees the quickest, least-expensive route to paying off your loans.

While SAVE and other IDR plans offer dramatically lower monthly payments, they extend the overall time you’ll make payments. That means more interest over time, which ultimately costs a borrower thousands of dollars more than Standard repayment.

Depending on your specific situation, another IDR plan may fit your needs better. To ensure you choose the right plan, explore your options using our guide and the FSA Loan Simulator.

How Do I Apply for the SAVE Repayment Plan??

ED has created an online SAVE application tool that’s easy to use. You’ll need an account at StudentAid.gov before you begin.

Once you complete your application it must be approved by ED. Due to the popularity of the SAVE program, the review process is very slow. As of this time (March 2024) it may take three months for your application to be approved. The good news is that your account may be put into a deferment during the review period meaning your payments will be temporarily suspended.

What Benefits Will Be Added to the SAVE Repayment Plan?

ED hopes to introduce several additional benefits to the SAVE throughout 2024. The shortened path to loan forgiveness was originally planned for Summer 2024, so they’re moving faster than expected.

Within a few months, the department will likely announce even lower monthly payments and changes to rules regarding which payments count towards repayment. Visit StudentAid.gov for a complete list of planned benefits.

We Can Help!

If you need help picking a student loan repayment plan or have questions about your current loans, Student Connections can help! Talk to one of our Borrower Advocates at (866) 311-9450, Monday through Friday, 9:00 a.m. to 6:00 p.m. ET. Our services are paid for by schools across the country and are free to you.

Prefer a DIY approach? Read our guide to repayment, “How to Survive Student Loan Repayment in 2023.”

*The Standard Repayment Plan currently is the default plan for borrowers when their loans enter repayment. It’s designed to pay off a borrower’s loans within 10 years.