The U.S. Department of Education recently launched the Savings on a Valuable Education (SAVE) Plan, the newest income-driven repayment program available to federal student loan borrowers. It is designed to lower payments, simplify student loan repayment, and more.
In a nutshell, the SAVE Plan is the most beneficial income-driven repayment (IDR) plan to date, and most federal student loan borrowers could benefit from it. Here's a look at what the program does, who qualifies for it, and how to enroll and take advantage.
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What could the SAVE Plan do for you?
The SAVE Plan is an income-driven repayment program designed to do four things:
- Lower student loan payments: The SAVE Plan limits undergraduate student loan payments to just 5% of discretionary income (previously 10%) and raises the threshold of what is considered discretionary income in the first place. Under the SAVE Plan, most borrowers' payments will be reduced by $1,000 or more per year.
- Unpaid interest is forgiven: Even if your required monthly payment is $0, under the SAVE Plan, any interest that isn't covered by a borrower's payment is forgiven. The objective is for no borrowers who fulfill their obligations under the plan to see their balance go up over time.
- Forgive low-balance loans quickly: The program forgives any remaining balance after 20 or 25 years of repayment for most borrowers. But for borrowers whose original balances were $12,000 or less, anything remaining after 10 years of repayment will be forgiven.
- Simplify the IDR process: Previously, borrowers had to recertify for income-driven repayment plans once a year by providing their latest income data. The SAVE Plan requires annual recertification, but for the first time ever, the process will be automatic if borrowers agree to securely share their IRS information.
Do you qualify?
To qualify for the SAVE Plan, you must have federal student loans. Private loans are not eligible for SAVE or any other income-driven repayment plans.
Most types of federal student loans are eligible, including:
- Federal Direct Unsubsidized Loans
- Federal Direct Subsidized Loans
- Federal Direct Consolidation Loans (consolidated loans paid to students)
- Grad PLUS Loans
Also, while Federal Perkins Loans and any Federal Family Education Loans (FFELs) are not directly eligible, they can be consolidated into a Direct Consolidation Loan and then will become eligible for the SAVE Plan.
In fact, there are only two types of federal student loans that are not qualified for the program. First, any federal student loans made to parents, or any consolidation loan that was used to repay loans made to parents, are not eligible. Parent loans can qualify for some federal programs, such as Public Service Loan Forgiveness (PSLF), but not for SAVE.
Second, any student loans that are currently in default are not eligible. But the Department of Education's Fresh Start initiative can be used to get your loans back in good standing, after which the borrower can then enroll in the SAVE Plan, in a process that takes about 10 minutes.
How to enroll in the plan today
If you qualify and want to take advantage of the SAVE Plan, enrollment is quick and easy. In fact, millions of borrowers will be enrolled automatically.
Specifically, if you were enrolled in the REPAYE Plan (the most popular income-driven plan previously), you'll be automatically enrolled in the SAVE Plan, which is technically replacing REPAYE.
Everyone else can enroll directly on the Department of Education's website, and the form should take no more than 10 to 15 minutes to fill out.
