August 30, 2023

Family Finances

SAVE – Student Loan Repayment Program

With over 28 million borrowers of Federal student loans resuming payments following a multi-year hiatus, the Biden-Harris Administration released a new income-driven repayment (IDR) plan. Known as the Saving on a Valuable Education (SAVE) plan, this IDR approach calculates monthly payments according to a borrower’s income and family size, ultimately forgiving any outstanding balances after a specified duration.

Outlined below are the major distinctions between the SAVE plan and the former REPAYE plan:

  • Reduces cap on discretionary income. The monthly payment amount is calculated with a maximum of 5% of discretionary income. The cap under the REPAYE plan was formerly 10%.
  • Change in calculation of discretionary income. Discretionary income is now calculated as the difference between Adjusted Gross Income (AGI) and 225% of the U.S. Poverty line, up from 150% under REPAYE. For borrowers with an AGI around or below this threshold, their payments can be as low as $0/month.
  • Loan balances will not grow as long as borrowers make their payments. If a borrower’s calculated monthly payment amount is less than interest accrued on the loan, the government will pay the interest. For example, if a borrower qualifies for payments of $0/month and their loans generate $100/month of interest- the government pays the cost to keep the balance from growing.
  • Early forgiveness for low-balance borrowers. Under the SAVE plan, borrowers whose original principal balances were $12,000 or less will receive forgiveness after 120 payments. For each additional $1,000 borrowed above that level, the plan adds an additional 12 payments for up to a maximum of 20 years for undergraduate debt or 25 years for graduate loans. Therefore, all borrowers who maintain monthly payments under this plan will have their loans forgiven in either 20 or 25 years.

The loans eligible for the SAVE Plan include:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans made to graduate or professional students
  • Direct Consolidation Loans that did not repay any PLUS loans made to parents.

To sign up for the SAVE plan, federal student loan borrowers can go to the Student Aid website found at this link here: If you are already on the Revised Pay As You Earn (REPAYE) plan, you will be automatically enrolled in the new SAVE plan.

If you’re currently weighing your loan repayment options and have questions, contact a Rockbridge advisor.

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