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SAVE Repayment Plan: Lower Monthly Payments for Student Loans

Discover how the new SAVE Repayment Plan offers lower monthly payments for student loans based on income and family size. Learn about its benefits, including interest elimination and simplified spousal income consideration.

Questions Answered in this Article

  1. Q: What is the SAVE Plan? A: The SAVE Plan is a new repayment option that replaces the existing REPAYE Plan, offering lower monthly loan payments based on income and family size.
  2. Q: How does the SAVE Plan calculate monthly payments? A: Monthly payments under the SAVE Plan are calculated based on discretionary income, which is the difference between adjusted gross income (AGI) and 225% of the U.S. Department of Health and Human Services Poverty Guideline for the borrower’s family size.
  3. Q: What are the benefits of the SAVE Plan? A: The SAVE Plan provides various benefits, including increased income exemption, elimination of remaining interest, and exclusion of spousal income for married borrowers filing separately. It also offers the lowest monthly payments among all available income-driven repayment plans.
  4. Q: When can borrowers apply for the SAVE Plan? A: Borrowers currently enrolled in the REPAYE Plan or those who sign up for it will automatically transition to the SAVE Plan once it becomes available. The application for the SAVE Plan will be released during the summer, and borrowers will be notified directly.
  5. Q: How much will borrowers pay each month under the SAVE Plan? A: Monthly payments under the SAVE Plan vary based on income and family size. If earning $32,800 or less annually, borrowers will have a monthly payment of $0. Those earning above this threshold will save at least $1,000 per year compared to other income-driven repayment plans.

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

SAVE Repayment Plan Offers Lower Monthly Loan Payments

Introducing the Saving on a Valuable Education (SAVE) Plan, a new and improved repayment option that replaces the existing Revised Pay As You Earn (REPAYE) Plan. Borrowers currently on the REPAYE Plan will automatically receive the benefits the new SAVE Plan offers.

What You Need To Know

The SAVE Plan, similar to other income-driven repayment (IDR) plans, calculates your monthly payment based on your income and family size. What sets the SAVE Plan apart is its ability to provide the lowest monthly payments among all available IDR plans, benefiting the majority of student borrowers. Here’s what you need to know about this plan:

  1. Increased Income Exemption: The SAVE Plan raises the income exemption level from 150% to 225% of the poverty line. This change allows for a significant decrease in your monthly payment compared to other income-driven repayment plans.
  2. Monthly Payment Calculation: Your monthly payment amount is determined based on your discretionary income, which is the difference between your adjusted gross income (AGI) and 225% of the U.S. Department of Health and Human Services Poverty Guideline for your family size. As a result, if you are a single borrower earning $32,800 or less (or a family of four earning $67,500 or less, with higher thresholds in Alaska and Hawaii), you will not owe any loan payments. Borrowers earning more than these amounts will save at least $1,000 per year compared to the current income-driven repayment plans.
  3. Elimination of Remaining Interest: Under the SAVE Plan, 100% of the remaining interest on subsidized and unsubsidized loans is eliminated once a scheduled payment is made. Making your monthly payment ensures that your loan balance does not grow due to unpaid interest. For example, if $50 in interest accumulates each month and you make a $30 payment, the remaining $20 will not be charged.
  4. Exclusion of Spousal Income: The SAVE Plan does not consider spousal income for borrowers who are married and file taxes separately. This change eliminates the need for your spouse to cosign your IDR application.

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

When Can I Apply For The SAVE Plan?

If you are enrolled in the REPAYE Plan or sign up for it now, you will automatically transition to the SAVE Plan once it becomes available. The application for the SAVE Plan will be released during the summer, and borrowers will be notified directly when it is available. Additionally, you can apply for the SAVE Plan by contacting your loan servicer or selecting the REPAYE Plan, which will put you on it once it is launched.

For those already on an IDR plan, check if you are enrolled in the REPAYE Plan by logging into StudentAid.gov and reviewing your My Aid page. If you are on the REPAYE Plan, you will be automatically enrolled in the SAVE Plan. If you are on a different repayment plan, you must switch to REPAYE now or the SAVE Plan once it becomes available to enjoy its benefits. You can create one to access this information if you don’t have a StudentAid.gov account.

Your income and family size determines the monthly payment amount under the SAVE Plan. Starting this summer, if you earn $32,800 or less annually (equivalent to approximately $15 per hour), your monthly payment will be $0. If your income exceeds this threshold, you will save at least $1,000 per year compared to other IDR plans.

The SAVE Plan offers a more manageable repayment option for student borrowers, allowing for lower monthly payments based on income and family size. With the added benefits and simplified application process, it aims to alleviate the financial burden of student loans.

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

What are the benefits of the SAVE Plan?

In addition to the reduced monthly payments based on income and family size, the SAVE Plan offers several other advantages:

  1. Increased Income Exemption: By raising the income exemption level to 225% of the poverty line, the SAVE Plan allows more borrowers to qualify for lower monthly payments. This change relieves individuals and families with moderate incomes who may have struggled to meet their repayment obligations under previous plans.
  2. Interest Elimination: One notable feature of the SAVE Plan is the elimination of remaining interest on subsidized and unsubsidized loans after a scheduled payment. This ensures that borrowers’ loan balances do not continue to grow due to unpaid interest. By removing this financial burden, the SAVE Plan offers borrowers a more straightforward path toward becoming debt-free.
  3. Simplified Spousal Income Consideration: Under the SAVE Plan, borrowers who are married and file taxes separately no longer need their spouse to cosign their IDR application. This change streamlines the application process, allowing borrowers to maintain financial independence and manage their loan repayment without relying on their spouse’s income.

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

When can borrowers apply for the SAVE Plan?

Borrowers currently enrolled in the REPAYE Plan or those who sign up for it will automatically transition to the SAVE Plan once it becomes available. The application for the SAVE Plan is expected to be released during the summer, and borrowers will receive direct notifications when it becomes accessible. Additionally, borrowers can also apply for the SAVE Plan by contacting their loan servicer directly or selecting the REPAYE Plan, which will automatically enroll them in the SAVE Plan once it is launched.

For borrowers already on an IDR plan, checking their current repayment plan status is essential. By logging into their StudentAid.gov account and navigating to the My Aid page, borrowers can review their loans and identify the repayment plan associated with each loan. If they discover that they are enrolled in the REPAYE Plan, they can rest assured that they will be automatically enrolled in the SAVE Plan when it becomes available. However, if they are on a different repayment plan, they must switch to the REPAYE Plan or transition to the SAVE Plan once it is released to take advantage of its benefits. Those who do not have a StudentAid.gov account can easily create one to access this information and manage their loans efficiently.

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

How much can borrowers expect to pay each month?

The monthly payment amount under the SAVE Plan is determined based on income and family size. Starting this summer, borrowers earning $32,800 or less annually (approximately $15 per hour) will have a monthly payment of $0. This provision ensures that lower-income individuals are not burdened with loan payments, making their student loan repayment more manageable. For borrowers earning above this threshold, the SAVE Plan guarantees savings of at least $1,000 per year compared to other income-driven repayment plans, providing additional financial relief.

The SAVE Plan offers significant benefits to student borrowers, such as lower monthly payments, interest elimination, and simplified spousal income consideration. With its enhanced features and streamlined application process, the SAVE Plan aims to alleviate the financial strain of student loans and provide borrowers with a more straightforward path to achieving financial stability and freedom.

Summary

  • The SAVE Plan replaces the existing REPAYE Plan and offers lower monthly loan payments.
  • The SAVE Plan calculates monthly payments based on income and family size, providing the lowest monthly prices among all available income-driven repayment plans.
  • The plan increases the income exemption from 150% to 225% of the poverty line.
  • Remaining interest on subsidized and unsubsidized loans is eliminated after a scheduled payment is made under the SAVE Plan.
  • Spousal income is excluded for borrowers who are married and file separately, removing the need for a cosigner on the IDR application.
  • Borrowers already enrolled in the REPAYE Plan will automatically transition to the SAVE Plan.
  • The application for the SAVE Plan will be available during the summer, with direct notifications to borrowers.
  • Borrowers can also apply by contacting their loan servicer or selecting the REPAYE Plan, which will automatically enroll them in the SAVE Plan.
  • Borrowers currently on a different IDR plan will need to switch to the REPAYE Plan or the SAVE Plan once it becomes available to access the benefits.
  • Monthly payment amounts under the SAVE Plan are based on income and family size, with $0 payments for those earning $32,800 or less annually and savings of at least $1,000 per year for higher earners compared to other IDR plans.
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