The Federal Student Aid office within the Department of Education has announced that the Saving on a Valuable Education (SAVE) Plan will replace the existing Revised Pay As You Earn (REPAYE) Plan, which provides the lowest monthly payments of any income-driven repayment (IDR) plans available.
“The SAVE plan is very generous to borrowers, almost like a grant after the fact,” higher education expert Mark Kantrowitz said to CNBC.
The FSA says some of the changes will take effect this summer, but additional benefits will go into effect in 2024.
The income exemption increases from 150% to 225% of the federal poverty line. That means you won’t owe loan payments if you’re a single borrower earning $32,800 or less or a family of four earning $67,500 or less; however, amounts are higher in Alaska and Hawaii. The FSA says borrowers earning more than these amounts will still save at least $1,000 per year compared to the current IDR plans.
The SAVE plan also eliminates 100% of the remaining interest for subsidized and unsubsidized loans after a scheduled payment is made. SAVE also excludes spousal income for are married and file separately, so your spouse won’t have to cosign your IDR application.
If you’re already enrolled in the REPAYE Plan or recently applied, the FSA says you will automatically be put on the SAVE Plan. You can also select the option for your loan servicer to put you on the lowest monthly payment plan, which is usually REPAYE, the FSA adds.
The SAVE application will be available later this summer. You can apply by contacting your loan servicer directly or logging into your FSA account to submit a request.
The biggest benefit going into effect next summer will cut borrowers’ monthly payments in half — 10% to 5% of income above 225% of the poverty line — and some borrowers will have a $0 monthly bill.
Kantrowitz explained to CNBC that previously, a borrower who made $40,000 a year would have a monthly student loan payment of $151. Under SAVE, their payment would go to $30. Even someone who earned $90,000 would see lower monthly payments drop to $238 from $568.
CNBC reported that most borrowers should qualify if their loan is in good standing.
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