- There are several reduced-payment options for student loan holders who meet income and family size requirements.
- An income-driven repayment plan may be a good choice if you can't handle your monthly payments.
- Your federal student loans are no longer in forbearance.
If you're no longer able to pay off your federal student loans at the same rate due to a change in circumstances, the good news is that there are ways to reduce your monthly payments. If your current payment eats up a lot of your income, or you have dependents, you may qualify for an income-driven repayment plan.
The SAVE Plan is a simplified income-driven repayment (IDR) plan, which aims to provide more affordable student loan payments for borrowers with low to middle incomes. There are several student loan forgiveness scams to avoid, but IDR is a legitimate option worth pursuing.
What changed with the SAVE plan?
The SAVE Plan replaces the previous variations of IDR plans (Income-Contingent, Income-Based, Revised Pay As You Earn). Borrowers are expected to have substantially lower monthly payments compared to other IDR options.
How does the SAVE plan work?
The SAVE plan offers four key components to those working to pay off their student loan balance:
- Income-based payments: Your monthly payment is tied to your discretionary income (income above a certain threshold).
- Lower payment percentage: The SAVE Plan calculates your payment based on a smaller percentage of your discretionary income compared to older IDR plans.
- Loan forgiveness: If you make payments for the required time (typically 20-25 years), your remaining student loan balance is forgiven.
- Subsidized interest coverage: The government may cover some or all of your unpaid subsidized loan interest under the SAVE Plan.
Do I qualify for the SAVE plan?
To know if you qualify for the SAVE plan, you need to know your loan type, as well as a few key details. The loans eligible for the SAVE plan are:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct PLUS Loans made to graduate or professional students
- Direct Consolidation Loans that didn't repay any PLUS loans made to parents
Those with Subsidized Federal Stafford Loans (from the FFEL Program), Unsubsidized Federal Stafford Loans (from the FFEL Program), graduate students with FFEL PLUS Loans, FFEL Consolidation Loans, or Federal Perkins Loans, are only eligible for the SAVE plan if consolidating these loans into a direct consolidation loan
As for income requirements, there is no income limit to qualify for the SAVE plan.
FAQs
To apply for the SAVE Plan, the process will likely be through the Student Aid website. Details on the new IDR changes and how to apply are being revised.
The SAVE Plan can work in conjunction with PSLF, potentially lowering your payments and making forgiveness more accessible.
Drawbacks to the SAVE Plan include the fact that interest that can still accrue on unsubsidized loans, and the length of the forgiveness timeline (20-25 years).
