What you need to know about the SAVE plan, the income-driven plan to repay student loans

By | March 11, 2024

NEW YORK (AP) — More than 75 million student loan borrowers have enrolled in the U.S. government’s latest repayment plan since it launched in August.

President Joe Biden recently announced he is canceling federal student loans for nearly 153,000 borrowers who participated in the plan, known as the SAVE plan. Forgiveness was granted to borrowers who had made payments for at least ten years and originally borrowed $12,000 or less.

The SAVE plan was created last year to replace other existing income-based repayment plans offered by the federal government. More borrowers now qualify for a reduction in their monthly payments to $0, and many qualify for lower payments compared to other repayment plans.

For Lauran Michael and her husband, the SAVE plan has cut student loan payments in half.

Since getting married, they have both paid off her husband’s student loans, which would have amounted to about $1,000 a month when payments resumed after a pause during the pandemic. Under the SAVE plan, their payments are now $530 per month.

“We don’t want our loans to dictate our life choices, and we can’t do other things because we pay so much money. The SAVE plan is definitely a game changer for us,” says Michael, a 34-year-old interior designer in Raleigh, North Carolina.

Michael’s family pays for childcare for their two children with the money they saved from not paying during the pandemic and reduced payments under the SAVE plan.

If you are interested in applying for the SAVE plan, here’s what you need to know:


The U.S. Department of Education offers several plans for repaying federal student loans. Under the standard plan, borrowers are charged a fixed monthly fee that ensures all their debts are repaid after 10 years. But if borrowers have trouble paying that amount, they can enroll in one of several plans that offer lower monthly payments based on income and family size. These are known as income-driven repayment plans.

Income-based options have been offered for years and typically limit monthly payments to 10% of a borrower’s discretionary income. If a borrower’s income is low enough, his bill is reduced to $0. And after 20 or 25 years, the remaining debt is erased.


More borrowers in the SAVE plan will qualify for $0 payments. This plan does not require borrowers to make payments if they earn less than 225% of the federal poverty level – $32,800 per year for a single person. For other plans, on the other hand, the threshold is 150% of the poverty line, or $22,000 per year for a single person.

Additionally, the SAVE plan prevents interest from piling up. As long as borrowers make their monthly payments, their total balance will not increase. Once they pay their adjusted monthly payment (even if it is $0), any remaining interest is forgiven.

Other major changes will come into effect in July 2024. Student loan payments will be capped at 5% of discretionary income, down from 10% now. Those with graduate and undergraduate loans pay between 5% and 10% depending on their original loan balance.

The maximum repayment period is limited to 20 years for those with only a student loan and 25 years for those with a student loan.


The SAVE plan is available to all student loan borrowers in the Direct Loan Program who are in good standing with their loans.

Read more about the SAVE subscription here.

How do I apply for the savings plan?

Borrowers can apply for the SAVE plan using the income-driven repayment plan through the Department of Education website.


If you are one of the borrowers benefiting from forgiveness under the SAVE plan, you will receive an email from the Department of Education.


If you worked for a government agency or nonprofit, the government loan forgiveness program offers cancellation after 10 years of regular payments, and some income-driven repayment plans cancel the remainder of a borrower’s debt after 20 to 25 years.

Borrowers should ensure they are enrolled in the best possible income-driven repayment plan to qualify for these programs.

Borrowers who have been defrauded by for-profit colleges can also apply for relief through a program known as Borrower Defense.

If you want to repay your federal student loans under an income-driven plan, the first step is to fill out an application through the Federal Student Aid website.


Several categories of borrowers would be eligible for relief under Biden’s second attempt at widespread cancellation after the Supreme Court rejected his first plan last year.

The proposed plan includes relief for borrowers who have been paying off their loans for at least 20 or 25 years, automatic forgiveness for borrowers who qualify for income-driven repayment plans but are not enrolled, and loan cancellations for borrowers who attended for-profits. which, among other things, prevented them from paying their student loans.

Whether any of this relief will happen is a looming question as conservatives vow to fight any attempt at mass student loan elimination. The new proposal is more limited, targeting several categories of borrowers who could have all or part of their loans forgiven, but a legal challenge is almost certain.

Currently, borrowers who qualify for forgiveness under the SAVE program will have their loans forgiven on a rolling basis, the Department of Education said.


The Associated Press receives support from the Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.

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