Home |Student Loan | I make ~96K pre tax (‘23), based on my ‘22 taxes my ibr/idr payments are about $151/mo (made about 60k in ‘22). I get a standard ~5% raise every year and currently plan on utilizing PSLF. Should I switch to SAVE or stick with my current PAYE (IBR/IDR) plan?

I make ~96K pre tax (‘23), based on my ‘22 taxes my ibr/idr payments are about $151/mo (made about 60k in ‘22). I get a standard ~5% raise every year and currently plan on utilizing PSLF. Should I switch to SAVE or stick with my current PAYE (IBR/IDR) plan?

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Abbey Johnson, Helping with Student Loan Documentation
Answered on September 25,2023

The decision between PAYE and SAVE when one is doing PSLF comes down to overall cost for you.

PSLF forgiveness is tax free (federally and all but 1 state) so the amount forgiven doesn't really matter, meaning the potential interest savings on SAVE are not your main concern.

What you would pay attention to is whether the cap on payments provided by PAYE is going to be more beneficial than the lowered payments on SAVE.

PAYE caps the payments at the 10 year standard amount, but SAVE does not so people whose income to loan balance would have them hit that cap early might actually pay less on PAYE overall than they would on SAVE.

If your income is much higher than your loan balance you may hit what you would pay on the standard (and sooner rather than later).

For example--lets take a 50k balance at 6% and put our single person (no dependents) on SAVE. (Also assuming all grad loans).

A 50K balance might cost $555/month on the 10 year standard plan --not a good option for PSLF because after 120 payments (10 years) the balance is paid off and there is nothing to forgive.

If they have an AGI of 50k they can go on SAVE and get a payment of ~$143 a month. Their AGI is basically equivalent to what they owe. But if their AGI jumps to 110k, they would pay ~$643 a month on SAVE. In that case the AGI is high compared to the balance of the loans, and depending on the time left to forgiveness they could pay their loans off, or pay more to get the forgiveness than they would have if they had been on PAYE (which would have capped them at $555).

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Ultimate Guide on SAVE Plan - Payment Calculation, Interest, Forgiveness

Under the Saving on a Valuable Education (SAVE) plan, a single borrower who makes less than $15 an hour will not have to make any payments. Borrowers earning above that amount would save mor..
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