How to Save on Your Student Loan with the SAVE Plan
Student loan payments can take up a big chunk of monthly expenses. But luckily there are resources available to help manage the load. With the Saving on a Valuable Education (SAVE) Plan, borrowers with low or middle incomes could have lower monthly student loan payments compared to other income-driven repayment plans. Check out everything you need to know about the SAVE Plan below.
Your Student Loan and the SAVE Plan
The Saving on a Valuable Education (SAVE) Plan is the newest income-driven repayment (IDR) plan. Like other IDR plans, the SAVE Plan calculates your monthly payment amount based on your income and family size. In addition, the SAVE Plan has unique benefits that will lower payments for many borrowers. The SAVE Plan replaced the Revised Pay As You Earn (REPAYE) Plan. Borrowers on the REPAYE Plan automatically get the benefits of the new SAVE Plan.
The SAVE Plan decreases monthly payments by increasing the income exemption from 150% to 225% of the poverty line. This means SAVE can significantly decrease your monthly payment amount compared to other IDR plans. Because your required monthly payment is a percentage of your discretionary income, your payment will be $0 if your discretionary income is $0. For example, 225% of the Poverty Guideline amount for a family size of one (in the 48 contiguous states) is $32,800, which means that if your annual income is equal to or less than $32,800 and your family size is just yourself, your discretionary income is $0 and your monthly payment will be $0. The same is true for a family size of four with an annual income of $67,500 or less.
The SAVE Plan eliminates 100% of remaining monthly interest for both subsidized and unsubsidized loans after you make a full scheduled payment. This means that if you make your monthly payment, your loan balance won’t grow due to unpaid interest that accrued since your last payment. For example: If $50 in interest accumulates each month and you have a $30 scheduled payment, the remaining $20 would not be charged once you make your monthly payment on time.
How to Apply
Use the IDR application to apply for the SAVE Plan.
If you were on the REPAYE Plan, you’ve been automatically enrolled in the SAVE Plan. There is no need to reapply or request to change your plan. Learn how to check which plan you’re on.
Depending on your situation, repayment plans like the SAVE Plan might or might not be the best choice for you. Read about available repayment plans through the federal government and use available resources, such as the student loan calculator Loan Simulator, to evaluate your situation and find the best repayment option for you.
Make an Appointment
Columbia Credit Union is always here for you with free financial coaching from certified credit union pros. Have questions about student loans? Want to learn about debt management strategies or quick budgeting tips? Make an appointment to chat about your financial goals and how to achieve them.