Home |SAVE Plan | Why does the loan consolidation for my $98,000 in graduate loans under SAVE result in a total payment of $198,000 over 25 years, doubling the loan amount, despite my understanding that interest would be waived? Is there something I'm overlooking compared to PAYE and IBR plans, which calculate a total payment of $167,000?

Why does the loan consolidation for my $98,000 in graduate loans under SAVE result in a total payment of $198,000 over 25 years, doubling the loan amount, despite my understanding that interest would be waived? Is there something I'm overlooking compared to PAYE and IBR plans, which calculate a total payment of $167,000?

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Abbey Johnson, Helping with Student Loan Documentation
Answered on September 29,2023

98000 at an example 6% interest, accrues approximately $490 a month in interest. If you pay $436, they waive $54 and your balance stays at 98000.

Assuming your payment never increases (and it will increase as your income goes up but for our example purposes, let’s pretend it doesn’t), you’d pay $436*300 months (25 years since graduate loans).

That’s $130,800 and each month they waive $54, and your balance stays $98000. So at year 25 you have paid at least that and would likely pay taxes on the 98000 forgiven. They calculate $198,000 because they expect your payment to go up and your forgiven balance may be less than 98,000.

For PAYE and IBR your payment likely covers the interest (let’s say $490 again) but then you are paying ~22/month to the principal.

(Also 98000 at our example 6% would likely run you about 1k a month on the standard and cost over $120k to pay back over 10 years).

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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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