New ‘SAVE’ Repayment Plan for Student Loans: How it Works

More than half of those enrolled in SAVE qualify for $0 payments — and almost 360,000 borrowers have already received student loan forgiveness.
Eliza Haverstock
By Eliza Haverstock 
Updated
Edited by Karen Gaudette Brewer

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Updated on June 25:

Two federal judges have paused the SAVE repayment plan's 10-year student loan forgiveness and blocked reduced payments from taking effect for millions of borrowers July 1. If you’re on the SAVE plan, keep making your scheduled payments. You can still enroll in SAVE to get its other benefits. Read the latest about the SAVE lawsuits.

The newest federal income-driven repayment (IDR) plan, Saving on A Valuable Education (SAVE), launched in August 2023. It replaced REPAYE, a previous IDR plan that rolled out in 2015.

SAVE is the most generous student loan repayment plan yet:

  • Borrowers earning less than about $32,800 individually, or less than $67,500 for a family of four, will see $0 monthly bills.

  • Most other borrowers will see their payments cut by at least half, with the most benefit going to those with undergraduate loans only. 

  • Students who borrowed $12,000 or less will see their remaining balances forgiven after 10 years of payments, instead of 20 to 25 years.

  • If you make your monthly payments, interest won't build up on your student loan balance.

Nearly 8 million borrowers are enrolled in SAVE, and over half of this group — 4.5 million people — has qualified for $0 monthly student loan payments, the Education Department said in mid-April.

And roughly 360,000 borrowers enrolled in SAVE who took out $12,000 or less for college, and who have been in repayment for at least 10 years (including the pandemic payment pause), are in line for loan forgiveness, as of April 12. This wave of relief is worth about $4.8 billion, according to the Education Department.

SAVE borrowers eligible for forgiveness should receive email notifications. This represents an acceleration: SAVE loan forgiveness for borrowers with limited debt was originally slated to roll out in July 2024.

Borrowers can sign up for the new plan now on studentaid.gov/idr. Here are the other key facts to know about SAVE.

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How SAVE differs from other student loan repayment plans

More income is sheltered

Right now, the Education Department calculates IDR payments based on discretionary income — your household income minus 150% of the federal poverty guideline for your family size and location.

If your household income is $75,000 for a family of four in Virginia, your non-discretionary income is $45,000 and your discretionary income is $30,000, based on 2023 U.S. federal poverty guidelines. Payments under current IDR plans are a percentage of that $30,000.

The new plan places the threshold for discretionary income at 225% of the federal poverty guideline. That same $75,000 household would see payments based on just $7,500 of discretionary income.

Estimate your payments under the new IDR:

Required payment is cut in half

Current IDR plans require borrowers to pay at least 10% of their discretionary income each month. Under the new plan, income-driven repayment for undergraduate loans would be set at 5% of discretionary income.

This means, on top of the lowered repayment amount based on the change in discretionary income calculations, borrowers with undergraduate loans will pay much less.

For the family with $75,000 in household income, that’s the difference between a $250 monthly payment and a $31 payment.

Borrowers with only graduate school loans still would pay 10%. Borrowers with both undergraduate and graduate loans would pay a weighted average between 5% and 10%.

Forgiveness comes sooner

Currently, borrowers are eligible for forgiveness of their remaining student loan balance after 20 or 25 years under current IDR plans, regardless of how much money they took out for school. However, the new plan would cut that down to 10 years for borrowers with principal loan balances of $12,000 or less for undergraduate or graduate study.

One additional year of repayment is required for each additional $1,000 borrowed above $12,000. So, for example, if you took out $14,000 to pay for college, you'd reach forgiveness in about 12 years.

With the new plan, the Education Department projects that 85% all community college borrowers will be debt-free within 10 years.

Unpaid interest is cancelled

REPAYE payments did not cover all of the interest on a loan each month. The government covers half of the unpaid interest and the rest mounts over time. This new rule applies to both subsidized and unsubsidized federal student loans.

Under the new SAVE plan, any interest unpaid each month would be covered by the government, so long as the borrower keeps up with their monthly payments. This leftover interest would not accrue.

An example from the Federal Student Aid office: "If $50 in interest accumulates each month and you have a $30 payment, the remaining $20 would not be charged."

Who qualifies for the SAVE plan?

Most borrowers with federal student loans are eligible for the SAVE plan. There is no income limit to qualify. If you have certain types of federal student loans, such as Perkins or FFELP loans, you may have to consolidate them before you can get on any IDR plan, including SAVE.

Generally, the SAVE plan is best suited for people who earn the least relative to how much student debt they owe.

These types of loans are not eligible for SAVE:

  • Private student loans.

  • Parent PLUS loans.

🤓Nerdy Tip

If you refinance your student loans with a private lender, you will not be eligible for the SAVE IDR plan.

How to apply for the SAVE plan

Borrowers with federal student loans can sign up for SAVE on studentaid.gov/idr or by contacting their student loan servicer. IDR applications typically take a few weeks to process.

Borrowers already enrolled in the REPAYE plan were automatically placed in SAVE.

When is the SAVE plan available?

The SAVE plan has had a graduated rollout.

Parts of the plan became available to borrowers before repayment resumed in October 2023. Forgiveness for certain borrowers began rolling out in February 2024, and the rest of the plan will launch by July 2024, per the latest Department of Education guidance. Here's the new IDR rollout timeline:

SAVE benefits available by October 2023

  • More income is protected. Income exemption raised from 150% to 225% of the poverty line, which could significantly shrink monthly payments for borrowers.

  • Interest won't build. Unpaid interest won't accumulate if monthly payments are made.

  • Benefits for some married borrowers. Spousal income for borrowers who are married and file taxes separately will be excluded from IDR payment calculations; spouses are no longer required to co-sign your IDR application.

SAVE benefit starting in February 2024

  • Loan forgiveness applied for smaller balances. Remaining loan balances forgiven for borrowers who originally took out $12,000 or less for undergraduate or graduate study and have made payments for at least 10 years.

SAVE benefits available by July 2024

  • Monthly bills halved. Payments on undergraduate loans will be cut in half, from 10% to 5% of income above 225% of the poverty line.

  • Consolidation penalty lifted. Borrowers who consolidate their federal loans will no longer lose progress toward IDR loan forgiveness.

  • Automatic credit toward IDR forgiveness. This will be applied to borrowers' accounts for certain periods of deferment and forbearance.

  • Make up for missed payments. Borrowers will be allowed to make additional “catch-up” payments to get credit for all other periods of deferment or forbearance that don't qualify for automatic credit.

  • Automatic enrollment for borrowers with default risk. Borrowers with payments at least 75 days late on other repayment plans will be automatically enrolled in an IDR plan if they previously agreed to give the Education Department access to their tax information. Individuals will be enrolled in whatever plan offers the lowest payment based on their eligibility.

Other changes to income-driven repayment in the works

The Education Department is in the process of unveiling other changes to the general IDR plan process and application. Highlights include:

  • Integration with IRS system. Your tax and family size information is automatically available if you grant access to the Education Department. No need to manually provide this information on your IDR application.

  • Automatic IDR recertification. You'll no longer need to manually recertify your income and family size each year if you agree to disclose your tax information from the IRS. You'll be notified of your new payment amount if your information changes.

  • No interest capitalization if you leave IDR. Unpaid interest on your loans will no longer be added to your principal when you leave any IDR plan, except for the Income-Based Repayment (IBR) Plan.

  • Redesigned IDR application. It'll take 10 minutes or less to complete, the Education Department says.

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