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Introducing SAVE: A Generous Student Loan Repayment Plan | Education Department

Discover the newly finalized income-driven repayment plan, SAVE (Saving on A Valuable Education), offering generous benefits for student loan borrowers. Find out how you can reduce monthly payments, receive loan forgiveness, and prevent interest accumulation. Learn more from the Education Department.

Questions Answered in this Article

Question 1: What is the name of the newly finalized income-driven repayment plan introduced by the Education Department? Answer: The freshly finalized income-driven repayment plan introduced by the Education Department is Saving on A Valuable Education (SAVE).

Question 2: What are the key benefits of the SAVE repayment plan? Answer: The SAVE plan offers several key benefits, including reduced monthly payments, loan forgiveness options, prevention of interest accumulation on the loan balance, and simplified repayment choices.

Question 3: How can borrowers qualify for $0 monthly bills under the SAVE plan? Answer: Borrowers earning approximately $32,800 individually, or less than $67,500 for a family of four, can qualify for $0 monthly bills under the SAVE plan.

Question 4: How does the SAVE plan differ from income-driven repayment plans? Answer: The SAVE plan simplifies repayment choices, increases income protection, cuts the required payment in half for undergraduate loans, provides faster loan forgiveness timelines, and cancels unpaid interest each month.

Question 5: When will the SAVE plan be available, and what are the additional benefits? Answer: Parts of the SAVE plan will be available to borrowers this summer, with other benefits being implemented by July 2024. These additional benefits include halving monthly bills, forgiveness of remaining balances for smaller loan amounts, elimination of consolidation penalties, automatic credit towards forgiveness during deferment or forbearance, and more.

More: Navigating Student Loan Repayment: Challenges and Strategies for Borrowers as Payments Resume

The New Income-Driven Repayment Plan: How It Works


The Education Department recently introduced its newest income-driven repayment plan, Saving on A Valuable Education (SAVE), following the Supreme Court’s decision to block student debt cancellation. The final rules of SAVE outline the most generous repayment plan for undergraduate student loans. Here are the key improvements and features of the plan:

  1. Monthly Payments: Borrowers with individual incomes below $32,800 or families of four with incomes below $67,500 will have $0 monthly bills. Other borrowers will see their payments reduced by at least half, with the greatest benefit given to those with undergraduate loans.
  2. Loan Forgiveness: Students who borrow less than $12,000 will have their remaining balances forgiven after ten years of payments instead of the previous 20 to 25 years.
  3. Interest-Free Payments: Monthly payments prevent interest from accruing on the student loan balance.
  4. Implementation: Parts of SAVE will be available this summer, allowing borrowers to sign up ahead of the resumption of bills in the fall. Interest on student loan balances will start building again on September 1, and bills will become due in October. The Education Department assures that income-driven repayment (IDR) applications submitted in the summer will be processed in time for the first bill, but it is recommended not to delay as loan servicers may take a few weeks to process requests.

More: Department of Education Proposes New Regulations to Protect Students from Excessive Debt

Compared to President Biden’s debt cancellation plan, which would have provided a one-time relief for existing borrowers, this new IDR plan has the potential to benefit current and future college students for years to come. The plan aims to assist individuals with lower projected lifetime earnings, reducing their total payments significantly.

Moreover, the new plan will simplify the repayment process and minimize borrower confusion. SAVE will replace the Revised Pay As You Earn (REPAYE) plan, streamlining the options available and phasing out or limiting enrollments in other repayment plans.

More: SAVE Repayment Plan: Lower Monthly Payments for Student Loans

Key Differences in the New Student Loan Repayment Plan Include:

  1. Repayment Choices: The proposal reduces option overload for borrowers by replacing multiple IDR plans with SAVE, providing a more straightforward system.
  2. Increased Income Protection: The threshold for discretionary income is raised to 225% of the federal poverty guideline, resulting in significantly reduced monthly payments for borrowers.
  3. Payment Reduction: Undergraduate loan payments will be set at 5% of discretionary income, cutting the required amount in half. Graduate school loans will still need a 10% payment, while borrowers with both undergraduate and graduate loans will pay a weighted average between 5% and 10%.
  4. Loan Forgiveness Timeframe: The new plan shortens the forgiveness period to 10 years for borrowers with principal loan balances of $12,000 or less. For each additional $1,000 borrowed above $12,000, a different year of repayment is required.
  5. Cancellation of Unpaid Interest: The government will cover any unpaid interest each month if borrowers keep up with their monthly payments. This applies to both subsidized and unsubsidized federal student loans.

More: Legitimate Ways to Get Student Loan Forgiveness: Exploring Government Programs

When is the New IDR Plan Available?

The Education Department plans to roll out SAVE earlier than expected, with some benefits available to borrowers starting this summer. Additional benefits will be implemented by July 2024. The changes include reduced monthly bills, forgiveness of remaining loan balances, elimination of penalties for loan consolidation, automatic credit towards forgiveness during deferment or forbearance periods, catch-up payments for missed periods, and automatic enrollment for borrowers at risk of default.

Federal student loan borrowers can sign up for the new repayment plan. Those already enrolled in the REPAYE plan will be automatically transferred to SAVE when available. Private student loans are not eligible for IDR or other government forgiveness options, and parent PLUS, loan borrowers, have their income-contingent plan.

Furthermore, the Education Department is introducing changes to the IDR plan process and application. These include integration with the IRS system, automatic IDR recertification based on tax information, and no interest capitalization when leaving IDR plans (except for the Income-Based Repayment Plan). The IDR application itself will also be redesigned for easier completion.

More: Federal Student Loan Borrowers to Benefit from Significant Repayment Changes and Debt Forgiveness

These changes aim to alleviate the burden of student loan debt and provide more manageable repayment options for borrowers.

  1. Integration with IRS System: The new IDR plan will integrate with the IRS system, allowing automatic access to tax and family size information. By granting access to the Education Department, borrowers will no longer need to provide this information when applying for IDR manually.
  2. Automatic IDR Recertification: Manual annual recertification of income and family size will no longer be necessary if borrowers agree to disclose their tax information from the IRS. If there are any changes in the borrower’s information, they will be notified of their new payment amount.
  3. No Interest Capitalization when Leaving IDR: Under the new plan, unpaid interest on loans will not be added to the principal balance when transitioning out of any IDR plan, except for the Income-Based Repayment (IBR) Plan. This change prevents interest from capitalizing and accruing additional costs.
  4. Redesigned IDR Application: The Education Department aims to streamline the application process, stating that it will take 10 minutes or less to complete. The redesigned application will be more user-friendly and efficient.

These additional changes seek to simplify the IDR plan application process, reduce administrative burdens for borrowers, and ensure accurate calculation of payments based on income and family size.

Borrowers with federal student loans must contact their loan servicer and submit an IDR application for the new SAVE plan when it becomes available later this summer. Borrowers already enrolled in the REPAYE plan will be automatically transitioned to SAVE. By taking proactive steps and applying early, borrowers can ensure a smooth transition to the new IDR plan before loan payments resume in October.

It’s worth noting that private student loans are not eligible for IDR or government forgiveness programs, while parent PLUS loan borrowers have their income-contingent plan. Borrowers should review their specific loan details and consult with their loan servicer for the most accurate information regarding their repayment options.

Overall, introducing the SAVE plan and accompanying changes to the IDR process and application aim to provide borrowers with greater flexibility, affordability, and long-term debt relief in managing their student loans.

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