Today in information that I wish I didn't have to share, we're less than a month away from federal student loan payments resuming. The COVID-era freeze on interest accrual ended Sept. 1, and payments are set to resume in October. Sigh.
Sadly, President Joe Biden's plan for student loan forgiveness didn't come to pass, but for some borrowers, a new income-driven repayment plan called SAVE (Saving on a Valuable Education) can unlock serious monthly savings — especially for borrowers with a low or middle income. And according to a Sept. 6 tweet from Biden, 4 million Americans are already on board.
Folks, join the 4 million Americans who have already signed up for the most affordable student loan repayment plan ever created, our Administration's SAVE Plan.
Here are five things you need to know about the SAVE Plan, which is currently available to borrowers with federal direct unsubsidized or subsidized, consolidated, or grad PLUS loans:
1. If you sign up for SAVE, your monthly payments will be calculated based on your annual income and family size. If you're a single person making $32,800 per year or less (about $15 per hour), then your monthly payment will be $0.
2. Making your monthly payments on the SAVE Plan prevents interest from being added to the total amount of your loan. They explain it on the Federal Student Aid website: "If $50 in interest accumulates each month and you have a $30 payment, the remaining $20 would not be charged." If you're all too familiar with your loans growing each month no matter what you do, this change is a real relief.
Now that student loan interest has resumed, here’s a new benefit you can take advantage of by enrolling in the SAVE Plan.
3. If you're married and filing separately, your spouse's income will not be counted toward your income, and your spouse won't be included in your family size.
4. Starting in July 2024, payments on the SAVE Plan will be capped at 5% of discretionary income for undergraduate loans and between 5% and 10% for borrowers who hold both graduate and undergraduate loans.
5. Also in 2024, folks who originally borrowed $12,000 or less will be eligible for forgiveness after 120 payments have been made. And forgiveness is still an (eventual) option for those who borrowed more; 12 payments will be added to the 120 for every additional $1,000 on the original loan, for a maximum of 20 or 25 years.
Wondering how your student loan payment can be lowered on the new Saving on a Valuable Education (SAVE) Plan?
Here's what some of the people who've signed up so far are saying about the SAVE Plan:
Some people are saying that the SAVE Plan will have a huge impact on their finances. One Threads user wrote, "It is going to save me a ton of money over 25 years and for the first time in my life I feel like paying my student loans is something that isn't going to drown us as a family."
And over on TikTok, folks like Mordecai Nuccio, a photographer, are sharing exactly what their student loans look like on the SAVE Plan. For Mordecai, his payments are reduced to $0 per month, and he said, "I'm so grateful to have this option."
Student loan counselor Maya Gonzalez also posted about the new program, saying, "If you make less than $32K a year and your payments are resuming this September, you may not have to make those payments right now under the Biden-Harris SAVE Plan, and you can apply on StudentAid.gov."
On Twitter, one user shared a screenshot of a text from a friend who applied for SAVE. The friend wrote, "Just applied for the SAVE for my student loans and it dropped to $74 a month and only repaying $34k of the $61k I owe."
I had a friend of mine look into the new SAVE plan and hot damn.
Higher education shouldn’t bankrupt you. This just made it a whole lot easier for a whole lotta people.
Interest no longer accrues on these loans and people aren’t talking enough about it.
In response to this tweet, one user wrote, "I'll be paying back $29k of my $41k student loan debt on SAVE, which is awesome because what I initially borrowed was $28,765, so I'll only be paying back what I borrowed (which is how it should've been to begin with, but I digress)."
Another person said, "Went from paying $350+ per month to $42, it isn't forgiveness but it's definitely a step in the right direction."
However, folks earning higher incomes have reported not seeing a benefit from the SAVE Plan. One user on Reddit wrote, "Want to laugh? My payment on IBR [income-based repayment] is $445. My payment on SAVE would be $1200. I nearly puked. I also have private student loans… and other obligations (like a mortgage). Needless to say, I’m not switching." So while some can really benefit from the new plan, it's definitely not for everyone.
If you're already on the REPAYE Plan, you'll be automatically switched to SAVE. You can learn more about the SAVE Plan here and try crunching the numbers in this loan simulator to see if it's right for you.
