Working with the complexity of student loans can be overwhelming, but understanding your options, including the Saving on a Valuable Education (SAVE) plan, can have a tremendous effect. We’re going to break down how you’re eligible for student loan forgiveness under the SAVE plan and what to do next.
What is the SAVE plan?
The SAVE plan is, in effect, a federal income-driven repayment (IDR) plan that aims to make student loan payments more manageable based on income and family size. It aims to provide relief to you by modifying your monthly payments such that your payment amount is based on your monthly income, with the possibility for loan forgiveness in the future.
Read more: How do I apply for student loan forgiveness under PSLF?
Who is eligible for the SAVE plan?
Most federal student loan borrowers are qualified to receive the SAVE plan. No income threshold is necessary for eligibility. However, if you hold some types of federal loans, such as Perkins or Federal Family Education Loan Program (FFELP) loans, you may be asked to roll them into a Direct Consolidation Loan to qualify.
How does the SAVE plan calculate payments?
Under the SAVE plan, your monthly payment is determined by a percentage of your discretionary income, which is the difference between your adjusted gross income and 225% of the federal poverty guideline for your family size. For undergraduate loans, payments are capped at 10% of discretionary income, with a proposal to lower it to 5% currently blocked by a preliminary injunction.
Read more: Can student loans be forgiven for teachers, nurses, or military personnel?
What are the forgiveness terms under the SAVE plan?
The SAVE plan offers loan forgiveness after a set period, depending on the amount borrowed:
- For balances of $12,000 or less: Forgiveness is granted after 10 years of qualifying payments.
- For balances over $12,000: The repayment term increases by one year for each additional $1,000 borrowed. For example, if you borrowed $15,000, you’d be eligible for forgiveness after 13 years of payments.
How to apply for the SAVE plan?
To join the SAVE plan:
- Visit the Federal Student Aid website: Visit studentaid.gov to apply for Income Driven Repayment (IDR).
- Log in to your account: Log in securely with your FSA ID.
- Fill out the application: Provide the information requested about your income and family size.
- Submit and wait for confirmation: After you submit, your loan servicer will process your application and let you know your new payment amount.
Read more: What to do if your student loan forgiveness is blocked and you are enrolled in SAVE
What if you were previously enrolled in REPAYE?
If you were on the Revised Pay As You Earn (REPAYE) plan, you have been automatically transitioned to the SAVE plan. There’s no need to reapply or make changes; your payments will adjust according to the SAVE plan’s terms.
How do recent legal actions affect the SAVE plan?
Recent court rulings have impacted the implementation of certain provisions of the SAVE plan. Specifically:
- Blocked provisions: A federal court has prohibited the Department of Education from using the SAVE formula to calculate monthly payments and from forgiving loans after years of payments under the SAVE, Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR) plans.
- Ongoing litigation: Legal challenges continue to affect the availability and terms of the SAVE plan. It’s essential to stay updated on these developments to understand how they may impact your repayment strategy.
What steps should you take now?
Given the current uncertainties:
- Stay informed: Regularly check official sources like studentaid.gov for updates on the SAVE plan and other repayment options.
- Consult your loan servicer: They can provide personalized information based on your loan portfolio and inform you of any changes affecting your repayment plan.
- Explore alternative plans: Depending on your situation, other IDR plans or repayment options might be more suitable, especially in light of recent legal developments.
Continue reading:
How do I apply for student loan forgiveness under PSLF?
What to do if your student loan forgiveness is blocked and you are enrolled in SAVE
