The Biden administration has rolled out a new repayment plan that slashes payments for millions of borrowers based on their income.
Called SAVE (Saving on a Valuable Education), the program calculates payments based on a borrower’s income and family size. People under a certain income threshold can get their monthly payments eliminated altogether pretty quickly, and most others under this program will see their payments cut in half next July.
SAVE replaces the current income-driven repayment plan known as REPAYE. Borrowers already on the REPAYE plan will be automatically enrolled in the SAVE plan.
Key takeaway: You can go to the Federal Student Aid site to apply for the new SAVE program if you’re looking for student loan relief and aren’t already enrolled in REPAYE, the existing repayment program. The SAVE program could significantly cut or even eliminate your payments.
Who qualifies for SAVE?
Borrowers with federally held loans including direct subsidized, unsubsidized and consolidated loans can qualify for SAVE. SAVE is replacing the current income-driven repayment plan known as the Revised Pay as You Earn (REPAYE) program. Borrowers who are already on the REPAYE plan will be automatically enrolled in the SAVE plan.
Current and future borrowers with federal undergraduate or graduate loans are eligible. Parents who took out Parent PLUS loans cannot enroll in the new plan.
How is SAVE different from REPAYE?
More people will qualify for $0 payments
In the SAVE program, borrowers with discretionary income at 225% of the federal poverty guidelines or less won’t have to make payments. For an individual, that translates to about a $15 (or less) hourly wage or $32,800 or less annually. A family of four needs to make $67,500 or less annually.
In the REPAYE program, the income ceiling for eligibility is 150% of the poverty guideline.
Others who don’t qualify for $0 payments could see their payments cut in half
Come next July, most borrowers whose discretionary income is above 225% of the federal poverty guideline will see their monthly payments drop significantly. Specifically, the payment amount on undergraduate loans will be 5% of a borrower’s discretionary income (down from 10% as part of the REPAYE plan). Borrowers with graduate loan debt will pay 10% of discretionary income.
If you have both undergraduate and graduate debt, payments will be weighted accordingly.
Examples of estimated monthly payments under the SAVE plan
|Annual income||Family size|
Source: U.S. Department of Education
A break on interest
If your monthly loan payment isn’t big enough under SAVE to cover the interest due, the Department of Education will give you a break on the uncovered portion.
For example, if a borrower owes $50 in interest each month but their new payment under the SAVE plan is $30 a month, then the remaining $20 of interest due for that month gets dropped (as long the $30 monthly payment is made).
Married borrowers can get a break, too
SAVE allows married borrowers who file their taxes separately to base their monthly student loan payments on their own income, rather than their combined income. This means spouses no longer need to co-sign income-driven payment plan applications.
Quicker loan forgiveness
Starting in July 2024, borrowers with original undergraduate student loan balances of $12,000 or less will get their loans forgiven after just 10 years of making monthly payments — rather than 20 years under REPAYE.
Each additional $1,000 borrowed above $12,000 would add one year of payments before eligibility for forgiveness. For example, if a borrower’s original principal balance was $14,000, they would have their loans forgiven after 12 years.
How to sign up for SAVE
- REPAYE transition. If you’re already on the REPAYE plan, you’ll be automatically enrolled in SAVE and see your payments adjusted.
- SAVE application. If you haven’t applied for an income-driven repayment plan, you can find out more about SAVE and apply from the Department of Education’s Federal Student Aid website. After applying, you can check the status of your application on your account dashboard.
- If your loans are in default, eligible borrowers can return their loans into good standing and enroll in the SAVE program. See the Department of Education’s Fresh Start program.
You can also go to Credit Karma’s student loan resource page to get a handle on your student loans and understand what you owe, who your loan servicer is and what your options are for managing repayment.