Is SAVE and IDR the Same?

The Saving on a Valuable Education (SAVE) Plan, launched in August 2023, is a new income-driven repayment (IDR) plan for federal student loan borrowers. While SAVE is an IDR plan, it is not the same as other IDR plans the Department of Education offers such as:

• Income-Based Repayment (IBR)

• Income-Contingent Repayment (ICR)

• Pay As You Earn (PAYE)

The SAVE Plan was introduced by the Biden administration to modify and replace the existing Revised Pay As You Earn (REPAYE) plan. It offers most Americans more affordable monthly payments compared to other IDR plans.

Key differences between SAVE and other IDR plans include:

• Lower monthly payment calculations

• Faster loan forgiveness

• Simplified eligibility requirements

The new SAVE Plan is designed to provide a more accessible and affordable repayment option for federal student loan borrowers, particularly those with low and middle incomes, or larger family sizes. It builds upon the existing IDR framework by introducing several key features that set it apart from other plans:

• Lower monthly payments: The SAVE Plan caps monthly payments at 5% of a borrower’s discretionary income for undergraduate loans, which is significantly lower than the 10% cap under most other IDR plans.

• Larger income exemption: Under the new plan, more income is protected from being used to repay your student loan debt. SAVE increases the income exemption from 150% to 225% of the poverty line.

• Protects spouse’s income: For married borrowers who file taxes separately, the SAVE Plan will include the income of the spouse with federal student loans. The SAVE Plan married filing separately rule means that the spouse who doesn’t owe federal loans will not have their income included.

• Increased income protection: The plan protects more of a borrower’s income from being considered discretionary, resulting in lower monthly payments for many borrowers.

• Accelerated loan forgiveness: Borrowers with original principal balances of $12,000 or less will see their remaining balance forgiven after just 10 years of payments. For each additional $1,000 borrowed beyond that amount, an extra year of payments is required, up to a maximum of 20 years for undergraduate loans and 25 years for graduate loans.

• Interest coverage: The SAVE Plan offers an interest subsidy that covers unpaid interest. This change ensures that borrowers’ student loan balances do not grow as long as they make their required monthly payments.

By incorporating these features, the SAVE Plan aims to provide a more targeted and effective solution for borrowers struggling with student debt, helping them manage their loans more efficiently and achieve student loan forgiveness more quickly than under other IDR plans.

Related: SAVE Plan Income Limits

To qualify for the SAVE Plan, borrowers must meet certain eligibility criteria. These requirements are generally similar to those of other IDR plans, but there are a few notable differences.

Eligible Loans

The SAVE Plan is available to borrowers with the following types of federal student loans:

• Direct Subsidized Loans

• Direct Unsubsidized Loans

• Direct Graduate PLUS Loans

• Direct Consolidation Loans (as long as they do not include Parent PLUS Loans)

Borrowers with Federal Family Education Loan (FFEL) Program loans or Federal Perkins Loans may become eligible for the SAVE Plan by consolidating their loans into a Direct Consolidation Loan.

Related: Do You Have to Consolidate Loans for SAVE Plan?

Income Requirements

The SAVE Plan does not have strict income limits for eligibility. However, the plan’s lower monthly payments and faster loan forgiveness are designed to benefit low and middle-income borrowers the most. To learn more about how income affects monthly payments under the SAVE Plan, please read our article: SAVE Plan Income Limits

Parent PLUS Loan Eligibility

One significant difference between the SAVE Plan and other IDR plans is that Parent PLUS Loans are not eligible for the SAVE Plan. Borrowers with Parent PLUS Loans may still be eligible for the ICR Plan, but they cannot directly enroll in the SAVE Plan. They must first consolidate their loans using the double consolidation loophole.

Related: Are Parent PLUS Loans Eligible for the SAVE Plan?

Other Eligibility Factors

To be eligible for the SAVE Plan, borrowers must also:

• Have eligible federal student loans that are not in default

• Be willing to submit income documentation annually (unless they qualify for automatic income recertification)

• Not have a Federal Perkins Loan in active repayment status

Overall, the SAVE Plan’s eligibility requirements are designed to make the plan accessible to a wide range of federal student loan borrowers, particularly those with low and middle incomes who may benefit most from the plan’s lower monthly payments and faster loan forgiveness.

Applying for the SAVE Plan is a straightforward process that can be completed through the Income-Driven Repayment (IDR) Request Form online at the Federal Student Aid website, StudentAid.gov. Here’s how to apply:

1. Login to your FSA account

2. Click on Loan Repayment > Income-Driven Repayment (IDR) Plans to access the online application

3. Choose your student loan repayment plan

4. Import your tax information or upload alternative income information (e.g., W-2, pay stub, or letter if you’re self-employed)

Alternatively, you can download the paper IDR application and submit it to your loan servicer.

For borrowers previously on the REPAYE Plan, the transition to the SAVE Plan is automatic. These borrowers have been enrolled in the SAVE Plan and do not need to reapply or request a change in their repayment plan. To check your current plan:

1. Log in to your FSA account

2. Navigate to the My Aid page

3. Scroll down and view your loans

4. Each loan will list the associated repayment plan

To see the change reflected in your first bill under the SAVE Plan, apply as soon as possible. Borrowers who apply for the SAVE Plan or other IDR plans will see their new payment amount before submitting the IDR application, and it will also be displayed on their servicer’s website when the first bill is sent. Most borrowers who apply for the SAVE Plan can expect their next payment to reflect the SAVE amount.

Checking Application Status

After submitting your application, you can check its status by visiting your account Dashboard on StudentAid.gov. If you applied for the SAVE Plan close to your bill date or before your required payment due date, your servicer will place you in a forbearance status for the upcoming billing cycle while they process your application. This ensures that you do not pay more than necessary. Your servicer will also place you in forbearance if they cannot process your application before these dates.

For the most up-to-date information on your monthly payment amount, log in to your account with your student loan servicer.

If you are currently enrolled in an income-driven repayment plan other than the SAVE Plan, you may be wondering whether it’s beneficial to switch to the new plan. The answer depends on your specific financial situation and loan details.

Comparing SAVE to Other IDR Plans

The SAVE Plan offers several advantages over other IDR plans:

• Lower monthly payments: The SAVE Plan caps monthly payments at 5% of your discretionary income for undergraduate loans, while most other IDR plans cap payments at 10%.

• Faster loan forgiveness: Under the SAVE Plan, borrowers with original loan balances of $12,000 or less can receive loan forgiveness after just 10 years of payments. For each additional $1,000 borrowed, an extra year of payments is required, up to a maximum of 20 years for undergraduate loans and 25 years for graduate loans.

• Increased income protection: The SAVE Plan protects more of your income from being considered discretionary, which can result in lower monthly payments for low and middle-income earners.

When to Consider Switching to SAVE

You may benefit from switching to the SAVE Plan if:

1. You have a low or middle income: The SAVE Plan’s lower monthly payment cap and increased income protection can make your payments more affordable.

2. You have a smaller loan balance: If your original loan balance is $12,000 or less, you can receive loan forgiveness after just 10 years of payments under the SAVE Plan.

3. You want to simplify your repayment: The SAVE Plan offers streamlined eligibility requirements and an easier application process compared to some other IDR plans.

4. You’re seeking Public Service Loan Forgiveness (PSLF): Payments made under the SAVE Plan count towards the 120 qualifying payments needed for PSLF. To learn more, read our article: does the save plan qualify for pslf.

Related: Does the SAVE Plan Qualify for PSLF?

When to Stick With Your Current IDR Plan

In some cases, it may be more beneficial to remain on your current IDR plan:

1. You’re a high earner: If you have a high income, the SAVE Plan’s lower monthly payment cap may not provide significant relief, and you might end up paying more interest over time due to the extended repayment period.

2. You’re close to loan forgiveness under another plan: If you’ve already made significant progress towards loan forgiveness under another IDR plan, such as PAYE or the new IBR plan, switching to the SAVE Plan may extend your repayment period. Both of those plans offer loan forgiveness after 20 years for borrowers with loans from graduate school. Switching to SAVE could add 5 more years to your wait for loan forgiveness.

Related: Is the SAVE Plan Worth It? Not For High Earners?

The SAVE Plan is a new type of income-driven repayment plan that offers significant benefits to federal student loan borrowers, particularly those with low and middle incomes.

While the SAVE Plan shares some similarities with other IDR plans, it has several unique features that set it apart:

• Lower monthly payments capped at 5% of discretionary income for undergraduate loans

• Faster loan forgiveness for borrowers with smaller loan balances

• Increased protection of a borrower’s income

• Simplified eligibility requirements and application process

The SAVE Plan can be an excellent option for borrowers seeking more affordable monthly payments and a quicker path to loan forgiveness. But before you switch to it, review your individual financial situation and loan details.

Depending on your income, your new student loan payments might be a lot higher than your payment amount under your current plan.

Book a call with one of our consultants to get a personalized strategy.