The U.S. Department of Education recently launched the Savings on a Valuable Education (SAVE) Plan, the newest income-driven repayment program available to federal student loan borrowers. It is designed to lower payments, simplify student loan repayment, and more.
In a nutshell, the SAVE Plan is the most beneficial income-driven repayment (IDR) plan to date, and most federal student loan borrowers could benefit from it. Here’s a look at what the program does, who qualifies for it, and how to enroll and take advantage.
What could the SAVE Plan do for you?
The SAVE Plan is an income-driven repayment program designed to do four things:
- Lower student loan payments: The SAVE Plan limits undergraduate student loan payments to just 5% of discretionary income (previously 10%) and raises the threshold of what is considered discretionary income in the first place. Under the SAVE Plan, most borrowers’ payments will be reduced by $1,000 or more per year.
- Unpaid interest is forgiven: Even if your required monthly payment is $0, under the SAVE Plan, any interest that isn’t covered by a borrower’s payment is forgiven. The objective is for no borrowers who fulfill their obligations under the plan to see their balance go up over time.
- Forgive low-balance loans quickly: The program forgives any remaining balance after 20 or 25 years of repayment for most borrowers. But for borrowers whose original balances were $12,000 or less, anything remaining after 10 years of repayment will be forgiven.
- Simplify the IDR process: Previously, borrowers had to recertify for income-driven repayment plans once a year by providing their latest income data. The SAVE Plan requires annual recertification, but for the first time ever, the process will be automatic if borrowers agree to securely share their IRS information.
Do you qualify?
To qualify for the SAVE Plan, you must have federal student loans. Private loans are not eligible for SAVE or any other income-driven repayment plans.
Most types of federal student loans are eligible, including:
