What’s the SAVE Plan for federal student loans?
Student loan borrowers may have a new option to explore when it comes to paying back their student loans — an income-driven repayment (IDR) plan launched by the Biden Administration called the Saving on a Valuable Education (SAVE) Plan. It’s replacing the Revised Pay-As-You-Earn (REPAYE) Plan.
The plan was unveiled earlier in 2023, and a significant number of student loan borrowers were invited to enroll in the plan in August 2023. This plan’s launch directly coincided with the end of the pause on federal student loan payments, which ended in September 2023 after over a three-and-a-half-year pause.
In this article, we’ll break down the basics of the SAVE Plan, who’s eligible, how to apply, and commonly asked questions about it.
What are the basics of the SAVE Plan?
The SAVE Plan is a new income-driven repayment plan (IDR) for federal student loans. This plan is only available to undergraduate and graduate school borrowers (not parent PLUS loan borrowers). Like other IDR plans, it calculates federal loan payments using your income and family size, and there’s no income requirement to enroll in it.
A key difference from the other IDR plans is that the SAVE Plan no longer calculates federal loan payment amounts based on 10 to 15 percent of a borrower’s outstanding federal loan balance. Instead, the plan caps payments at 10 percent of a borrower’s discretionary income now. Starting in the summer of 2024, the plan will drop payments on undergraduate loans to 5 percent of a borrower’s discretionary income.
This change from pre-existing plans could lower your federal loan payments to $0 a month, depending on your discretionary income. For reference, discretionary income is the difference between your adjusted gross income (AGI) and 225% of the U.S. Department of Health and Human Services Poverty Guideline amount for your family size. Think about it as the money you have left over after you’ve paid off your necessary expenses like rent and utilities.
Another change with this plan (in comparison to other student loan repayment plans) is that interest charges won’t exceed the minimum amount you owe monthly to prevent the loan amount from growing due to unpaid interest.
Let’s say, for example, your regularly scheduled monthly payment is $70, and due to interest, that amount has become $100 one month; under the SAVE Plan, the remaining $30 won’t be charged to you if you make your $70 payment on time and in full. As a result, the SAVE Plan could lead to reducing borrowers’ loan payments.
In addition, starting in 2024, if your principal loan balance is $12,000 or less for an undergraduate loan, your remaining balance can be forgiven after ten years of repayment. Of note, you’ll need to make payments for an additional year for every $1,000 you borrowed above $12,000 for up to 20 or 25 years, depending on the degree you borrowed for. So, if your loan amount is $14,000, then you’d need to make payments for at least 12 years before you qualify for forgiveness.
When can you apply for the SAVE Plan?
If you were enrolled in the REPAYE Plan or recently applied to it, you’ve been automatically enrolled in the SAVE Plan already, and you’ll have seen your payments adjusted automatically without having to take any steps. You can also apply to the SAVE Plan if you weren't automatically enrolled.
How do you apply for the SAVE Plan?
To apply for the SAVE Plan, you’ll need to go to the Federal Student Aid portal and indicate whether you’re a new IDR applicant or a returning IDR borrower. As one option, you can fill out the online application, which is estimated to take no longer than 10 minutes, and you’ll need the following:
- A verified FSA ID
- Your financial information
- Your personal information
- Your spouse’s information (if applicable)
You can also download a PDF of the application on StudentAid.gov and mail it or request a paper copy of the application be mailed to you.
What federal student loans are eligible for the SAVE Plan?
The federal student loans that are eligible for the SAVE Plan include:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct PLUS Loans (loans made to graduate or professional students)
- Direct Consolidation Loans (as long as they weren’t used to repay any PLUS loans made to parents)
Some federal loans that can be consolidated into a Direct Consolidation Loan are also eligible for repayment under the SAVE Plan.
These include:
- Subsidized Federal Stafford Loans
- Unsubsidized Federal Stafford Loans
- FFEL PLUS Loans made to graduate or professional students
- FFEL Consolidation Loans (as long as they weren’t used to repay any PLUS loans made to parents)
- Federal Perkins Loans
What federal student loans aren’t eligible for the SAVE Plan?
There are a few federal loans that aren’t eligible for the SAVE Plan. These include:
- Direct PLUS Loans made to parents
- Direct Consolidation Loans that were used to repay PLUS loans made to parents
- FFEL PLUS Loans made to parents
- FFEL Consolidation Loans that were used to repay PLUS loans made to parents
- Any federal student loans that are currently in default
Common FAQs about the SAVE Plan
Is the SAVE Plan the best available plan to repay student loans?
The SAVE Plan provides the lowest monthly payments out of the IDR plans available to student borrowers. That being said, because this plan directly correlates payment amounts to your income, this may not be the best plan for everyone. With this plan, if your income increases, then the amount you pay monthly generally also increases.
Is this plan available for private student loans?
This repayment plan isn’t available for private student loans. Only certain federal student loans are eligible for this payment plan, as listed above.
Are parent student loan borrowers eligible for the SAVE Plan?
Those with Parent PLUS loans aren’t eligible for the SAVE Plan. Instead, these borrowers can enroll in the Income-Contingent Repayment (ICR) plan, the only IDR plan available to parent student loan borrowers.
How do you complete the SAVE Plan application if you speak a language other than English?
There’s a PDF of the application in English and Spanish. If you speak a language other than English and Spanish, the StudentAid.gov contact center provides support for over 100 common languages, including Mandarin and French, and can help with the application.
How do you complete the SAVE Plan application if you live outside the United States?
If you’re an American living outside the United States, you can access the application online without using a virtual private network (VPN).
If you need a paper version of the application, you can download a PDF copy (PDF), print it, fill it out, and mail it to your federal loan holder as described on the application.
If you don’t have internet access, you can also request a physical copy be sent to you by contacting Federal Student Aid at 1-800-433-3243.
If you’re married, will your spouse need to co-sign your SAVE Plan application?
Per Federal Student Aid, spouses don’t need to co-sign IDR plans, including the SAVE Plan.
Final thoughts
If you have federal student loans and are considering enrolling in a repayment plan, it’s important to fully consider your options to pick the right one for your situation. The right plan for one person might not be the right one for another, and that includes the SAVE Plan.
