Federal student loan borrowers will be able to enroll in a new income-driven repayment plan that education officials say could lower their monthly payments.
The Saving on a Valuable Education (SAVE) Plan will be replacing the Revised Pay As You Earn (REPAYE) Plan. Borrowers already on the REPAYE Plan will automatically get the benefits of the new SAVE Plan.
Under the SAVE Plan, a borrower’s monthly payment will be determined based on their income and family size. Federal student loans will start accruing interest again in September and payments will be due starting in October.
What is the SAVE Repayment plan?
The following benefits will go into effect as soon as the SAVE Plan is active.
The SAVE Plan increases the income exemption from 150% to 225% of the poverty line. In this plan, your monthly payment amount is based on discretionary income -- which is defined as the difference between your adjusted gross income (AGI) and 225% of the U.S. Department of Health and Human Services Poverty Guideline amount for your family size.
Department of Education provided the following example: “That means you will not owe loan payments if you are a single borrower earning $32,800 or less or a family of four earning $67,500 or less (amounts are higher in Alaska and Hawaii). Borrowers earning more than these amounts will save at least $1,000 per year, compared to the current income-driven repayment plans.”
The table below shows the 2023 Poverty Guidelines:
| Persons in family/household | Poverty guideline |
|---|---|
| 1 | $14,580 |
| 2 | $19,720 |
| 3 | $24,860 |
| 4 | $30,000 |
| 5 | $35,140 |
| 6 | $40,280 |
| 7 | $45,420 |
| 8 | $50,560 |
The plan eliminates 100% of the remaining interest for both subsidized and unsubsidized loans after a scheduled payment is made. This means as long as you’re making your monthly payment, the balance of your student loans won’t grow due to unpaid interest.
Department of Education provided the following example: For example: “If $50 in interest accumulates each month and you have a $30 payment, the remaining $20 would not be charged.”
The SAVE Plan excludes spousal income for borrowers who are married and file separately. A spouse will not need to cosign an IDR application.
What are the SAVE Plan benefits that will go into effect in 2024?
There are additional benefits that won’t go into effect until July 2024.
The Department of Education listed the following benefits:
- Payments on undergraduate loans will be cut in half (reduced from 10% to 5% of income above 225% of the poverty line). Borrowers who have undergraduate and graduate loans will pay a weighted average of between 5% and 10% of their income based upon the original principal balances of their loans.
- Borrowers with original principal balances of $12,000 or less will receive forgiveness of any remaining balance after making 10 years of payments, with the maximum repayment period before forgiveness rising by one year for every additional $1,000 borrowed. For example, if your original principal balance is $14,000, you will see forgiveness after 12 years. Payments made previously (before 2024) and those made going forward will both count toward these maximum forgiveness timeframes.
- Borrowers who consolidate will not lose progress toward forgiveness. They will receive credit for a weighted average of payments that count toward forgiveness based upon the principal balance of the loans being consolidated.
- Borrowers will automatically receive credit toward forgiveness for certain periods of deferment and forbearance.
- Borrowers will be given the option to make additional “catch-up” payments to get credit for all other periods of deferment or forbearance.
- Borrowers who are 75 days late will be automatically enrolled in IDR if they have agreed to allow the Department of Education to securely access their tax information.
What will my monthly payments be under the SAVE plan?
The SAVE Plan calculates your monthly payment amount based on your income and family size.
For example, anyone making $32,800 a year or less will have a monthly payment of $0. If you have a $0 payment due, you do not need to pay anything that month.
A single person who has a $25,000 loan with a 5% interest rate and makes $38,000 a year would likely have a $43 monthly payment under the SAVE Plan, according to the Department of Education.
Your loan servicer will calculate your actual monthly payment amount under the SAVE Plan.
The image below shows an estimated monthly payment under the SAVE Plan. An accessible version of the image above is available on the StudentAid.gov website.
How can you apply for the SAVE Plan?
Anyone who is already enrolled in the REPAYE Plan will automatically be put on the SAVE Plan as soon as it’s available. If you apply for the REPAYE Plan now, you will automatically be put on the SAVE Plan when it’s available.
How to check if you are on the REPAYE Plan
You can check and see if you’re on the REPAYE Plan by taking the following steps:
- Log in to StudentAid.gov
- Go to your My Aid page
- Scroll down, and view your loans.
Each loan will list a repayment plan. If you see that you are in the REPAYE Plan, that means you’ll automatically be enrolled in the SAVE Plan. If you’re on a different repayment plan, you’ll need to switch into REPAYE now, or SAVE once it’s available, to receive the benefits of the SAVE Plan.
If you don’t have a StudentAid.gov account, you can create an account.
What are the changes to income-driven repayment?
The Department of Education is going to launch the following changes to the income-driven repayment application and process this summer:
| Update to IDR | What This Means |
|---|---|
| New integration with the IRS to access financial information | When you apply for or recertify your IDR plan, you’ll be able to provide approval for the secure disclosure of tax information so that we can automatically access your latest IRS tax return. This saves you time because you don’t need to manually provide any income or family size information for your initial application or recertification. |
| Automatic IDR recertification of income and family size | If you agree to the secure disclosure of your tax information, the Department of Education and your loan servicer will automatically recertify your enrollment in IDR and adjust your monthly payment amount once a year. You’ll be notified when your payment is changing and, additionally, you will always be able to manually recertify your plan. Note: Auto-recertification will be available in 2024. If you apply for IDR electronically in August 2023 or later and you agreed to securely share your tax information, then your plan will automatically be recertified the next time your recertification is due. |
| End of interest capitalization when a borrower leaves most IDR plans | As of July 1, unpaid interest on your loans won’t be added to your principal when you leave any IDR plan, except the Income-Based Repayment (IBR) Plan (where capitalization is required by statute). |
| Redesigned application | The redesigned application will allow you to enroll in IDR in 10 minutes or less, save your progress, and track your application via your StudentAid.gov account. |
Still have questions? More information about the SAVE Plan is available on the Department of Education’s website.