6 Things You Should Know About the SAVE Plan

Financial AidLoan Repayment8 minutes

On July 18, 2024, a Federal Court issued a stay preventing the Department of Education from operating the Saving on a Valuable Education (SAVE) Plan. We are assessing the ruling and will be in touch directly with borrowers about how this will affect them.

Income-driven repayment (IDR) plans are helpful options for student loan borrowers who need more manageable monthly payment amounts. With the Saving on a Valuable Education (SAVE) Plan, families and individual borrowers with low or middle incomes will typically have lower monthly payments compared to other IDR plans.

You can apply for the SAVE Plan now. This new IDR plan replaced the Revised Pay As You Earn (REPAYE) Plan.

On all IDR plans, monthly payment amounts are based on your income and family size, which can lower your payments to as low as $0 per month. Depending on your situation, IDR plans—including the SAVE Plan—might or might not be the best choice for you. Read about available repayment plans and use available resources, such as the student loan calculator Loan Simulator, to evaluate your situation and find the best repayment option for you. Loan servicers are another helpful resource for figuring out your best option for repayment.

To help you understand the benefits of the SAVE Plan and choose the right repayment plan option for you, here are six things you should know:

  1. There are different repayment options to research before choosing the SAVE Plan.
  2. Big updates are coming to IDR plans in July 2024.
  3. The government interest subsidy on the SAVE Plan helps if you have low monthly payments.
  4. Income exemption and discretionary income changes lead to lower monthly payments on the SAVE Plan.
  5. Use the IDR application to apply for the SAVE Plan.
  6. Your IDR application takes time to process.

1

There are different repayment options to research before choosing the SAVE Plan.

While the SAVE Plan is a good option for most borrowers, it’s not the best option for everyone. If you’re trying to pay your loans off in a shorter period of time or if you’re aiming to pay only a certain amount over time, then the SAVE Plan may not align with your repayment goals. The SAVE Plan doesn’t always give you a lower monthly payment amount. In some cases, if you have a higher income, you might have a lower monthly payment amount on the Standard Repayment Plan. Your total principal balance, income level, and loan type will determine whether the SAVE Plan is your best option.

To view your loan(s) and your loan type(s), log in to StudentAid.gov and go to your My Aid page. Your loans will tell you which repayment plan you are enrolled in. With your current repayment plan and current monthly payment amount in mind, you can use Loan Simulator to compare what your monthly payments could be on different repayment plans.

Keep in mind that Loan Simulator produces estimates using assumptions that may not apply to you. Your loan servicer will provide your actual monthly payment amount. Read our latest article on Loan Simulator to learn more about this tool.

Note:  All IDR plans have different eligibility requirements. If you consolidate parent PLUS loans into a Direct Consolidation Loan, that new loan is eligible for the Income-Contingent Repayment (ICR) Plan but will not be eligible for the SAVE Plan—consolidated or not. Before consolidating, read about loan consolidation. View the table below to understand which loans are eligible for the SAVE Plan.

2

Big updates are coming to IDR plans in July 2024.

The SAVE Plan has several benefits for enrolled borrowers now. In February and July 2024, even more benefits of the SAVE Plan will go into effect:

Less Time to Forgiveness for Smaller Principal Balances

Starting in February 2024, the time to IDR loan forgiveness for borrowers on the SAVE Plan will drop to as few as 10 years (currently 20­–­­­­25 years) depending on how much you borrowed to attend school.

If you borrowed $12,000 or less, you’ll receive loan forgiveness after making the equivalent of 10 years of payments. (This amount of time is called your repayment term.) If you borrowed more than $12,000, then your repayment term will rise by one year for every additional $1,000 borrowed. For example, if you originally borrowed between $12,001 and $13,000, you’ll see forgiveness after 11 years, and if you borrowed between $13,001 and $14,000, you’ll get forgiveness after 12 years.

The maximum repayment term is capped at 20 years for those with only undergraduate loans and 25 years for borrowers with any graduate school loans. Any payments you’ve already made on any of the IDR plans or on the Standard Repayment Plan will count toward this forgiveness. The payment adjustment might change whether certain payments or months are credited toward your loan forgiveness.

Payments on Undergraduate Loans Will Be Cut in Half

Starting in July 2024, payments for borrowers with only undergraduate student loans will be cut in half. Those monthly payment amounts are currently calculated to be 10% of your discretionary income, but in July 2024 that number will drop to only 5% of your discretionary income. This means that no matter your income level, you will have more affordable payments.

Borrowers who have a mixture of both undergraduate and graduate loans will pay a weighted average of between 5% and 10% of their income based on the original principal balances of their loans taken to attend school.

Future Limits on Switching Plans

Starting in July 2024, there will some be additional limits on which plans you can switch between. If you’re on the SAVE Plan, you will not be able to reenroll in the Pay As You Earn (PAYE) Repayment Plan or the ICR Plan after July 1, 2024. If you make 60 or more payments on the SAVE Plan on or after July 1, 2024, then you will not be able to enroll in the IBR Plan.

3

The government interest subsidy on the SAVE Plan helps if you have low monthly payments.

One of the greatest benefits for borrowers on the SAVE Plan is the government interest subsidy. On the SAVE Plan, if you pay what you owe each month, your loans won’t grow due to unpaid interest. This is because any accrued interest not covered by your monthly payment won’t be added to your principal balance.

Under other IDR plans, you may see your loan balance grow due to unpaid interest. With the SAVE Plan, any remaining accrued interest will be covered by the government, so your principal balance won’t increase.

Watch the Saving on a Valuable Educations (SAVE) Plan—The New Income-Driven Repayment Plan video for an explanation of how the government interest subsidy helps with your student loan repayment.

Note that if your monthly payment amount is only enough to cover part or all your accrued interest for the month, then your principal balance will not decrease. Depending on your repayment goals, this might not align with your ideal repayment timeline.

4

Income exemption and discretionary income changes lead to lower monthly payments on the SAVE Plan.

With the change of income exemption (protection) from 150% to 225%, the SAVE Plan typically leads to lower monthly payment amounts compared to other IDR plans. In the calculation below, we show how the change in discretionary income percentage combined with the change in income exemption results in a lower monthly payment amount.

Visit the link above for more information on how the SAVE Plan’s income protection benefit will lower monthly payments.

With the changes coming in July 2024, your monthly payment amount can be even lower than it would be on the SAVE Plan now.

Visit the link above for more information on how new SAVE Plan benefits will lower monthly payments in July 2024.

5

Use the IDR application to apply for the SAVE Plan.

The steps to complete an application for the SAVE Plan are the same for all the IDR plans. You log in to your StudentAid.gov account with your username and password (FSA ID) and complete the IDR application. Depending on your current situation and what repayment plan you’re enrolled in, you will indicate that you’re either a new IDR applicant or a returning IDR borrower.

To finish the application, you will need to specify whether you are employed or unemployed. If you indicate you’re employed, you’ll need to provide proof of income. If you’re unemployed, you’ll need to confirm whether you’re receiving unemployment benefits.

The application will also ask for your family size and marital status. If you’re married and file a joint federal income tax return, then you’ll need to include your spouse’s income. If you file taxes separately, your monthly payment amount will be based on your income only. When providing proof of income, either you’ll need to provide consent for us to securely access your federal financial information or, if you don’t file taxes, you’ll need to submit proof of income earned within the last 90 days. This can be accomplished by submitting a pay stub or a letter from your employer stating your gross pay.

Once you complete the application, you’ll be able to review the repayment plans you qualify for and select the best plan for you. You’ll then be asked to confirm that all the information in your application is correct and provide your signature.

6

Your IDR application takes time to process.

After your IDR application has been submitted, you can expect a processing time of a few weeks.

If your next payment due date is within 10 days from when you applied or if the servicer cannot process your application within 10 days of receipt, a processing forbearance may be applied to your account.

During a processing forbearance you won’t need to make payments, but interest will continue accruing on your loan(s) and will be added to the amount you’ll owe once you restart payments. To check the status of your IDR application, log in to StudentAid.gov and go to your My Activity page.

After your enrollment in the IDR plan is confirmed, you’ll receive a new billing statement from your loan servicer with your updated monthly payment amount.

If you want to make changes to your IDR application at any time after you’ve submitted it, contact your loan servicer or submit a new IDR Plan Request.

Reviewing this list of six things you should know about the SAVE Plan is a great step toward understanding how to approach student loan repayment. Using the available resources and reading up on your options are both good ways to help you select the right repayment option for you.

Remember: You never have to pay for help with your federal student loans. If you have questions about managing your loans, contact your loan servicer for free help. And make sure to know how to avoid student aid scams.


Eligible Loans for the SAVE Plan
Our New Income-Driven Repayment Plan
EligibleEligible if Consolidated into a Direct Consolidation LoanIneligible
  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans made to graduate or professional students
  • Direct Consolidation Loans that did not repay any PLUS loans made to parents
  • Subsidized Federal Stafford Loans (from the Federal Family Education Loan [FFEL] Program
  • Unsubsidized Federal Stafford Loans (from the FFEL Program)
  • FFEL PLUS Loans made to graduate or professional students
  • FFEL Consolidation Loans
  • Federal Perkins Loans
  • Direct PLUS Loans made to parents
  • Direct Consolidation Loans that repaid PLUS loans made to parents
  • FFEL Program Loans (some types can become eligible if consolidated)
  • Federal Perkins Loans (can become eligible if consolidated)
  • Any loan that is currently in default