Understanding the Student Loan SAVE Repayment Plan
Date Posted: 9/20/2023
Last month, the U.S. Department of Education and the Biden-Harris Administration launched the Saving on a Valuable Education (SAVE) repayment plan. The introduction of the SAVE plan coincides with the end of the student loan payment pause in October.
The SAVE repayment plan aims to cut payments on undergraduate loans in half, bring down borrowers’ loan payments, provide early forgiveness for low-balance borrowers, and ensure that borrowers don’t have their balance grow as long as they keep up with required payments.
This income-driven repayment plan (IDR) calculates payments based on the borrower’s income and family size—not their loan balances. This plan also forgives the remaining balance after a certain number of years of repayments.
Under the SAVE repayment plan, it is possible for a borrower to have a monthly payment of $0, and balances of $12,000 or less will receive forgiveness after 120 payments, which is about 10 years. In another example, a $14,000 principal balance will require about 12 years of repayments before loan forgiveness is applied. Payments made before 2024 and future payments will count toward the forgiveness timeframe. It is important to note that borrowers might have to pay an income tax on the amount that is forgiven.
Borrowers applying for any IDR plan must provide income information. One way to provide your adjusted gross income is to use the IRS Data Retrieval Tool (available during the IDR application process) to transfer income information from your federal income tax return. You may also print out the IDR plan request form and provide a copy of your federal income tax return or IRS tax return transcript.
To learn more about the SAVE repayment plan, read the press release from President Joe Biden, and visit StudentAid.gov.
The SAVE repayment plan aims to cut payments on undergraduate loans in half, bring down borrowers’ loan payments, provide early forgiveness for low-balance borrowers, and ensure that borrowers don’t have their balance grow as long as they keep up with required payments.
This income-driven repayment plan (IDR) calculates payments based on the borrower’s income and family size—not their loan balances. This plan also forgives the remaining balance after a certain number of years of repayments.
Under the SAVE repayment plan, it is possible for a borrower to have a monthly payment of $0, and balances of $12,000 or less will receive forgiveness after 120 payments, which is about 10 years. In another example, a $14,000 principal balance will require about 12 years of repayments before loan forgiveness is applied. Payments made before 2024 and future payments will count toward the forgiveness timeframe. It is important to note that borrowers might have to pay an income tax on the amount that is forgiven.
Borrowers applying for any IDR plan must provide income information. One way to provide your adjusted gross income is to use the IRS Data Retrieval Tool (available during the IDR application process) to transfer income information from your federal income tax return. You may also print out the IDR plan request form and provide a copy of your federal income tax return or IRS tax return transcript.
To learn more about the SAVE repayment plan, read the press release from President Joe Biden, and visit StudentAid.gov.