Demystifying SAVE: A Comprehensive Guide to the New Student Loan Repayment Program

The Biden administration has implemented a new repayment plan that lowers payments for millions of students based on their income as federal student loan repayments resume in October following a three-year hiatus.
The SAVE programme, which stands for Saving on a Valuable Education, bases payments on a borrower’s salary and family size. Before the payment halt ends, people with incomes below a specific level may have their monthly payments completely cancelled.

The current REPAYE income-driven repayment plan is replaced with SAVE. The SAVE plan will be automatically registered for borrowers who are currently on the REPAYE plan.

Who is eligible for SAVE?

For SAVE, borrowers with federally owned loans, including direct subsidised, unsubsidized, and combined loans, may be eligible. The Revised Pay as You Earn (REPAYE) programme, the existing income-based repayment scheme, is being replaced by SAVE. Existing REPAYE plan participants will be enrolled in the SAVE plan automatically.

Borrowers with federal undergraduate or graduate loans both present and future are eligible. Parents who obtained Parent PLUS loans are ineligible to join the new plan.

What distinguishes SAVE from REPAYE?

• More people will be eligible for payments of nothing.
• Borrowers in the SAVE programme are exempt from making payments if their discretionary income is at or below 225% of the federal poverty level. That amounts to around $15 (or less) per hour for a person or $32,800 (or less) each year. A family of four must earn no more than $67,500 per year.
• The income threshold for participation in the REPAYE programme is 150% of the poverty threshold.
• Others who are not eligible for 0$ payments can have their payments reduced by half.

By July of next year, the majority of borrowers whose discretionary income exceeds 225% of the federal poverty line will see a large decrease in their monthly payments. For undergraduate loans, the payment amount will be 5% of a borrower’s discretionary income (as opposed to 10% under the REPAYE scheme). Graduate loan borrowers must pay 10% of their discretionary income.

An interest-free period-

The Department of Education will grant you a discount on the uninsured portion if your SAVE loan payment isn’t sufficient to meet the interest owing.

For instance, if a borrower’s monthly interest payment is $50 but their new SAVE plan payment is $30, the remaining $20 in interest for that month is waived (as long as the $30 monthly payment is made).

Married borrowers are also eligible for a discount-

SAVE enables married borrowers to base their monthly student loan payments on their individual incomes rather than their combined income and to file their taxes separately. As a result, applications for income-driven payment plans no longer require the co-signatures of spouses.

Loan forgiveness will occur sooner starting in July 2024 for borrowers with original undergraduate student loan balances of $12,000 or less, as opposed to REPAYE’s 20-year loan forgiveness period.

Above $12,000, every $1,000 borrowed would result in an additional year of payments before becoming eligible for forgiveness. For instance, if a borrower had a $14,000 original principal sum, their loans would be forgiven after 12 years.

How to sign up for SAVE:

REPAYE changeover. You will immediately be enrolled in SAVE if you are currently on the REPAYE plan, and your payments will be modified.

Application SAVE. If you haven’t already, visit the Federal Student Aid website of the Department of Education to learn more about SAVE and submit an application. You may check the status of your application on your account dashboard after submitting it.

Eligible borrowers can reinstate their debts into good standing and sign up for the SAVE programme if their loans are in default. See the Fresh Start programme offered by the Department of Education.