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 more than $1,000 a year on their payments compared to other IDR plans.

What is the difference between REPAYE and SAVE?

REPAYE and SAVE are now the same plan and the names will be used interchangeably in the real world. For our purposes to avoid confusion I’m going to use repaye to talk about the current plan, and SAVE the new one. So SAVE is not an additional plan - it's a renamed and revised REPAYE. This renamed plan will continue to count for PSLF.

SAVE Plan Eligibility Criteria

Here are the loans that meet the SAVE Plan Eligibility Criteria.

• All Direct Loans (Direct subsidized and unsubsidized Stafford, Direct Graduate Plus, Direct consolidation in most cases) other than Parent Plus loans or consolidated PP loans are eligible – regardless of when the loan was made.

• Double consolidated PP loans are eligible – but only if the double consolidation was completed before July 1, 2025.

• Defaulted loans, FFEL loans and Perkins loans are not eligible – but can be made eligible by getting out of default and/or consolidating into the Direct Loan program at Student Aid portal.

SAVE Plan Payment Calculation

Under the SAVE plan, 225% of the poverty level for the borrower’s state and family size will be subtracted from their AGI/income. The repaye plan subtracts 150%, as does paye and both new and old IBR. ICR uses 100%.

Only SAVE/REPAYE are changing in these areas.

Under the SAVE program, payments are calculated as follows:

• 5% of discretionary income if the borrower only has undergraduate loans

• 10% of discretionary income if the borrower only has graduate loans

• a proportionate percentage if the borrower has both.

So for example, if a borrower had $50K in undergraduate and 50% in graduate they would use 7.5%.

They are basing the proportion on ORIGNAL total loan balance - which I'm going to have to dig down on that clause as it begs a bunch of questions for me. Payments under all of the IDR plans can be zero dollars if that's how the calculation works out.

Zero dollar payments under these plans count towards both IDR and PSLF forgiveness.

This is not a change. 

You can also refer to this for detailed SAVE Plan payment calculation.

SAVE Plan Interest

Under the SAVE plan, any interest not covered by the calculated monthly payment is waived.

This includes times when the borrower pays more than what is billed.

So if your payment is 100 a month and your interest is 200, the ED will forgive the 100 - even if you decide to pay 300. This applies to all loans eligible for SAVE. Yes that includes graduate loans.

If your billed payment amount covers your monthly interest you will not get any interest forgiven. To be crystal clear – this benefit is based on what you are BILLED - not what you actually pay.

So not paying won’t mean interest forgiveness if your billed payment covers that interest. And you don’t get the benefit if you don’t make the payment. Zero dollar calculated payments excluded of course.

SAVE Plan Forgiveness

Under SAVE Plan, forgiveness occurs after 300 months on the plan for graduate loans and consolidation loans that contain graduate loans.

Under SAVE forgiveness occurs after 240 months on the plan for undergraduate loans and consolidation loans that contain undergraduate loans.

If the borrower has both graduate and undergraduate - consolidated or not - the forgiveness is after 300 months.

You cannot be on different plans for different loan types. Under SAVE, if your original principal was $12K or less, forgiveness is after 120 payments.

This is total - not per loan.

So, if you have three $10K loans this doesn't apply to you. After $12K, they add a year of required payments under the plan for ever $1K over the 12K you owe. So if you owe $13K, you get forgiveness if you still have a balance after 11 years on SAVE.

Periods that Count Towards SAVE Plan Forgiveness

You get credit towards the forgiveness count for:

• payments made under an IDR ($0 payments count)

• payments made under a ten year standard or equivalent

• Cancer, unemployment, rehabilitation, military and economic deferment periods

• Americorps forbearance periods

• national guard forbearance -Department of defense forbearance

• bankruptcy forbearance on or after July 1, 2024 if the borrower made the required payments

Other deferments and forbearances, including in school deferment, grace and financial hardship forbearance do NOT count - however see below for a hold harmless option for these periods.

If the borrower consolidates loans with different counts after the end of this year, they will get a weighted average of the underlying loans counts.

If they consolidate before that they will get the highest count due to the one time IDR adjustment. See my post history if you don’t know what that is.

A borrower may obtain credit toward forgiveness for any months in which a borrower was in a deferment or forbearance not listed above by making an additional payment equal to or greater than their current IDR payment, including a payment of $0, for a deferment or forbearance that ended within 3 years of the additional repayment date and occurred after July 1, 2024.

Treatment of Spousal Income in SAVE Plan

Only the borrowers' income will be used in the calculation of REPAYE/SAVE, IBR, ICR and PAYE, if they are single or married and filing separately. But they will also exclude the spouse from the borrower's family size in this situation.

For REPAYE/SAVE, IBR, and PAYE - if both spouses have loans and both incomes are provided, the payment will be adjusted based on the spouse's loans (and income). Both spouses do not have to be on an IDR or the same plan for this.

For ICR, both spouses have to be on ICR specifically if both debts and income are to be used in the payment calculation.

In situations where both spouse's loans and income are being considered in the calculation - they will portion it as follows "Dividing the outstanding principal and interest balance of the borrower’s eligible loans by the couple’s combined outstanding principal and interest balance on eligible loans;" So they will determine a payment based on the combined income.

Say it comes out to $1000. If spouse A has 70% of the total debt their payment will be $700 and spouse B's payment will be $300

Status of PAYE, ICR Plans

The PAYE plan is being sunsetted. If you aren't enrolled in that plan on July 1, 2024 you never can. If you are and then change plans after that date you can never go back

The ICR plan is being sunsetted except for consolidated PP. If you aren't enrolled in that plan on July 1, 2024 you never can. If you are and then change plans after that date you can never go back. To repeat - this sunset doesn't apply to Parent Plus - ICR will still be available indefinitely for consolidated PP loans.

If as of July 1, 2024 you've made sixty or more payments under repaye you may not switch to the IBR plan. This is to prevent borrowers with graduate loans to be able to game the system and get forgiveness sooner.

Sunset of the Parent Plus double consolidation loophole 

The double consolidation loophole for Parent Plus borrowers will expire July 1, 2025.

They have specifically said they will honor those already made and those fully made by that date. After that date, even double consolidated PP loans will only be eligible for ICR, graduated repayment and extended repayment. They can still qualify for PSLF,but will only have ICR as an option to do so. (I'm particularly salty about this and their long argument as to the why is full of nonsense IMO.)

If you don’t know that is or want to learn more about it while it’s still available see the consolidation page on the TISLA site, towards the bottom.

Automatic IDR Enrollment and Recertification

Borrowers will be able to give blanket permission to access tax information via future IDR applications and promissory notes – but not until after July of next year or later. Otherwise they will have to provide it annually themselves. Borrowers will be able to initiate their intent to use an IDR plan and provide that tax info access in their promissory notes in the future.

When that happens you’ll go right into the lowest IDR plan as soon as you enter repayment with no action needed by you. Borrowers that initiate their intent for an IDR plan on their promissory note or future IDR application, and provide the blanket permission to access their tax info will automatically be entered into an IDR and recertified annually until they indicate otherwise.

They will also auto-enroll borrowers into IDR plans if they are 75 days past due, or some defaulters. But only if the IDR plan would be lower than their current plan. This will mean no need to recertify annually but you’ll need to watch your bills for payment changes - especially those on ACH. You will be able to withdraw this permission at any time.

References

In creating this guide, we have referred to high-quality, credible sources such as official government orders, user manuals, and relevant materials from government websites.

• SAVE Plan Federal Register
• SAVE Plan Fact Sheet
• Summary of SAVE/REPAYE Plan Final Rules