Changes in the political landscape could mean changes to repayment plans, including SAVE. The Biden administration launched this specific repayment option, but it won’t be in office forever. Although it’s not the debt relief he was hoping for, it’s being marketed as the “most affordable student loan repayment ever.” Shortly thereafter, the Biden administration released information about the groundbreaking SAVE plan and how it benefits borrowers. Ultimately, that plan was struck down by the Supreme Court and didn’t move forward. Originally, President Biden had high hopes of offering student loan forgiveness of $10,000 to $20,000 to borrowers. Let’s look at how it came about in the first place. But just as the new repayment option was launched, it could potentially be taken away as well. Many student loan borrowers stand to benefit from the new SAVE plan. Student loan borrowers with any graduate loans might be better off on PAYE, with fewer years of repayment. Look at your total costs over the life of the loan, including all of the interest, using our IDR calculator. That’s a major downside for graduate borrowers with the SAVE plan, as the extra years of payments can add up and set back your debt-free date.īefore enrolling in the SAVE plan, don’t just look at the monthly payment amount. Alternatively, PAYE offers forgiveness after just 20 years, regardless of what type of loans you have. Through SAVE, the repayment term is 25 years for borrowers with graduate loans. It might not make your payments more affordable and risks not having a remaining balance to forgiveness, if you’re pursuing that path.Īdditionally, it might not be the best option for borrowers with graduate loans working toward student loan forgiveness. Under SAVE, you might pay more than what you would under the Standard Repayment Plan. High-income earners might not see the benefit here. Other options like PAYE and IBR ensure that your payments won’t exceed what you’d pay on the Standard Repayment plan. One reason is that there’s no cap on the size of monthly payments under the SAVE plan. However, here’s a student loan repayment fact - it’s not the de facto best option for everyone. This is the new “it” repayment plan, propelled by great publicity from The White House. There’s no doubt that the SAVE plan ushers in some major changes that benefit student loan borrowers. Myth: The SAVE plan is the best repayment option for everyone. If you have a higher income, your payments will be higher and might cover all the interest that accrued during the month. To qualify for this benefit, your income likely needs to be low relative to your student loan debt. Borrowers are set to pay 5% to 10% of income, depending on the type of loans and degree level. Since this is an income-driven repayment plan (IDR), payments are calculated based on income. This keeps your loan amount from growing exponentially. But if you have low monthly payments that don’t cover the entire monthly interest accrued, then the unpaid interest won’t be added to your balance. You’re still on the hook for paying interest that your payment can cover. But if your total monthly payment doesn’t pay off the accrued interest, the government will pay the unpaid interest for that month. This isn’t true.īorrowers still have to pay interest, with monthly payments going toward accrued interest and the principal balances. However, a common SAVE plan myth is that under this repayment option, you don’t have to pay any interest. The student loan repayment plan offers the most borrower-friendly treatment of unpaid interest, which helps with the burden of debt. The interest subsidy is one of the most talked about benefits of the SAVE plan. Myth: You don't pay interest on the SAVE plan. Keep reading to discover other common myths around this new income-driven repayment option. Despite the advantages of this plan, one of the many misconceptions about it is that it’s the best IDR option for all borrowers. More than half of those borrowers are eligible for $0 monthly payments. The SAVE plan is rising in popularity, with 5.5 million borrowers signed up for it as of November 2023. From an interest benefit to a change in the poverty line calculation for discretionary income, you might be able to lower payments thanks to these changes. Launched in 2023 and effectively replacing the Revised Pay As You Earn (REPAYE) plan, the new SAVE plan offers considerable benefits. The Saving on a Valuable Education (SAVE) plan is arguably the most exciting repayment plan available to federal student loan borrowers.
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