New SAVE Income-Driven Repayment for Federal Loans

The Biden Administration officially released the application for the new Saving on a Valuable Education (SAVE) loan repayment plan on August 22, 2023. The SAVE plan is an income-driven repayment (IDR) plan for federal student loan borrowers, and replaces the REPAYE plan. 

Federal student loan borrowers are automatically placed into a standard repayment plan upon graduation. Standard repayment evenly divides the amount a student borrows into ten years of payments that begin after the student graduates or leaves school. As an alternative, borrowers can choose to enroll in one of five IDR plans to potentially lower the amount of their monthly payments. IDR plans base their payments on a percentage of the borrower's discretionary income. Discretionary income is calculated by subtracting a certain percentage of the federal poverty income level from a borrower's income. 

The SAVE plan increases the percentage of the federal poverty income level from 150% to 225%, meaning more of a borrower's income is protected from being counted towards the loan payment.  Further, beginning in July of 2024, the SAVE plan decreases the percentage of the discretionary income in the calculation from 10% to 5% (effectively cutting the payment in half) for borrowers of undergraduate loans.

An additional benefit of the SAVE plan is that any interest that accrues each month that is not covered by the calculated monthly payment amount will be forgiven. This means that borrowers in the SAVE plan will not see their loan principal balance grow as long as they make payments. Once a borrower has made payments under the SAVE plan for 20 years (for undergraduate loans) or 25 years (for graduate loans), any remaining balance is forgiven. For borrowers who begin repayment with a balance of under $12,000, that payment threshold for loan forgiveness is reduced to 10 years. 

You can learn more about all of the federal loan repayment options in our webinar, Federal Loan Repayment Options: Choosing the Right Path after the Pause. To review all of the details on the SAVE plan, visit the Federal Student Aid summary here. And if you decide to enroll in an income-driven repayment plan, including SAVE, log in to your Federal Student Aid account and apply here.

Watch the Federal Loan Repayment Options webinar recording