Here’s when and how to sign up for the SAVE plan before student loan payments restart
It’s official: The new federal student loan repayment plan is open.
Here’s what you need to know.
What happened?
President Joe Biden’s administration announced Tuesday that the Saving on a Valuable Education plan — what the White House calls the “most affordable repayment plan ever created” — has officially launched.
The White House estimates more than 20 million student loan borrowers could benefit.
“With the SAVE plan, we are making a promise to every student,” Education Secretary Miguel Cardona said during a Monday call with reporters. “Your payments will be affordable. You’re not going to be buried under a mountain of interest, and you won’t be saddled with a lifetime of debt.”
This comes after $39 billion in forgiveness for 804,000 borrowers, announced as a result of “historical failures” in how income-driven repayment plans were managed. It also follows the Supreme Court rejecting the broader student debt forgiveness program that would have forgiven more than $400 billion in federal student loan debt.
A beta version of the application was released at the end of July. Those who have already applied don’t have to apply again.
What does the SAVE plan do?
A new formula: It’s a type of income-driven repayment plan where your payments are based on your income and family size instead of your loan balance. And after a certain amount of time, any remaining balances will be forgiven.
It could significantly decrease how much you have to pay each month because of the new structure.
Payments are based on discretionary income. The new plan shields more income for basic needs, giving you less discretionary income, The New York Times reported, meaning 225% (up from 150%) of the federal poverty guidelines is protected from repayment. In other words, you make less than $15 an hour, you won’t have to make payments.
Interest: If you keep up with your monthly payments, your loan balance won’t grow because of unpaid interest. This applies to subsidized and unsubsidized loans. Let’s say you have a $30 payment that you make monthly, but $50 in interest accumulates. You wouldn’t be charged for that last $20.
“It also ends runaway student loan interest that leaves borrowers owing more than their initial loan,” Cardona said. “The nightmare of making payments and watching your loan balance get bigger and bigger will finally be over.”
Spouses: Your spouse no longer needs to cosign your income-driven repayment plan application, if you are married and file taxes separately.
IRS: You can give the Department of Education access to your tax information, meaning you won’t have to manually provide income or family size information when applying or recertifying.
What changes go into effect next year?
Payments: If you have an undergraduate loan, your payments will be cut to 5% from 10% of your discretionary income. If you have both undergraduate and graduate loans, you’ll pay a weighted average between 5% to 10%.
Forgiveness: If you originally borrowed $12,000 or less, your remaining balance will be forgiven after 10 years of payments (and with another year for every additional $1,000 borrowed). If you originally borrowed $14,000, it’ll take 12 years for your loans to be forgiven. If you consolidate your loans, you won’t lose progress toward forgiveness. You’ll also receive credit toward forgiveness for specific periods of deferment and forbearance, plus you can make “catch-up” payments for other periods of those. And if you’re 75 days late, you’ll be automatically enrolled if you’ve said the Department of Education can access your tax information.
Are your loans eligible?
These loans are eligible for the SAVE plan:
Direct subsidized loans
Direct unsubsidized loans
Direct PLUS loans made to graduate or professional students
Direct consolidation loans that did not repay any PLUS loans made to parents
If you consolidate the following loans into a direct consolidation loan, they would be eligible for the SAVE plan:
Subsidized Federal Stafford Loans (from the Federal Family Education Loan program)
Unsubsidized Federal Stafford Loans (from the Federal Family Education Loan program)
Federal Family Education Loan PLUS Loans made to graduate or professional students
Federal Family Education Loan Consolidation Loans that did not repay any PLUS loans made to parents
Federal Perkins Loans
The following loans are not eligible:
Direct PLUS Loans made to parents
Direct Consolidation Loans that repaid PLUS loans made to parents
FFEL PLUS Loans made to parents
FFEL Consolidation Loans that repaid PLUS loans made to parents
any loan that is currently in default.
If you have defaulted, you could qualify for the Fresh Start initiative.
How do you sign up?
You can sign up by going to StudentAid.gov/SAVE.
If you’re already enrolled in the REPAYE plan, you’ll be automatically enrolled in this one.
A senior administration official said an application is expected to take about four weeks to process.
How much will you pay?
It depends on how much you make and your family size. The Office of Federal Student Aid provides a loan simulator to help you calculate your student loan payments and pick a repayment option that works best for you.
But here are a few examples.
If you make $30,000, your estimated monthly payment is $0.
If you make $50,000 annually and have a family size of one, your estimated payment is $143. But if your family size is three, your estimated payment is $0.
If you make $60,000 and it’s just you, you could pay $227. With two people in your family, you’d pay $130; with three people, you’d pay $34. And with four people in your family, you could pay $0.
How do you apply?
The Education Department says it takes less than 10 minutes to fill out. These are the steps:
You’ll go to studentaid.gov and log in. Select menu, then loan repayment, and income-driven repayment plan request. Then start the application.
You’ll then confirm your contact information.
Then, you’ll review your federal loan information.
Then, confirm your personal information. This includes whether you’re married and your family size.
After that, you’ll transfer or enter your federal financial information, noting any significant decreases in income since your last tax return.
And last, you can review your current repayment plan or switch to a new one. You’ll be able to see your monthly payment, total to be paid and pay off date.
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