SAVE Plan

The SAVE Plan (Saving on a Valuable Education) replaced the REPAYE plan in 2023 and is now the most generous federal student loan repayment option available. It offers lower payments, better interest handling, and faster forgiveness than other income-driven plans.

SAVE Plan Key Features:

• Payment: 5% of discretionary income (undergraduate), 10% (graduate)
• Forgiveness: 20 years (undergraduate), 25 years (graduate)
• Interest subsidy: Government pays unpaid interest if your payment doesn't cover it
• No payment cap: Unlike PAYE, payments can exceed the 10-year standard payment
• Married filing separately: Spouse's income not counted (unlike REPAYE)

Who Qualifies for SAVE: ✅ Direct federal loans (subsidized, unsubsidized, PLUS, consolidation) ✅ Parent PLUS loans (after consolidating to Direct Consolidation Loan) ✅ No income requirements (unlike PAYE) ✅ No partial financial hardship test (unlike IBR)

SAVE vs Other IDR Plans:

Interest Subsidy (The Game Changer):

• Your payment: $200/month
• Interest accruing: $300/month
• SAVE subsidy: Government pays the $100 difference
• Result: Your balance doesn't grow!

Example SAVE Calculation:

• Income: $50,000
• Family size: 1
• Discretionary income: $50,000 - $24,000 (150% of poverty) = $26,000
• SAVE payment: $26,000 × 5% ÷ 12 = $108/month
• Interest subsidy: If interest > $108, government pays the difference

When SAVE Makes Sense: ✅ High debt-to-income ratio (debt > annual income) ✅ Low or variable income ✅ Graduate school debt (10% payment rate) ✅ Public service workers (PSLF + SAVE = best combo) ✅ Borrowers who want lowest payments

SAVE vs Standard Repayment:

• Standard: Fixed payment, 10 years, no forgiveness
• SAVE: Income-based, 20-25 years, potential forgiveness
• Break-even: Usually around $40,000-60,000 income

Important Considerations: ❌ Tax bomb

• Forgiven amount may be taxable income ❌ Longer payoff
• Takes 20-25 years vs. 10 years standard ❌ Annual recertification
• Must submit income documentation yearly ❌ Interest accrual
• Unpaid interest may capitalize (except SAVE)

How to Enroll in SAVE:

1. Log into studentaid.gov
2. Select "Apply for an Income-Driven Repayment Plan"
3. Choose SAVE Plan
4. Submit income documentation
5. Recertify annually

The Bottom Line: SAVE is usually the best student loan repayment plan for most borrowers. The interest subsidy prevents balance growth, and the lower payment percentage makes loans more manageable. If you have federal student loans, SAVE should be your first choice.