How Does the SAVE Plan Work with PSLF?
Updated on May 23, 2024
Is the SAVE Plan Eligible for PSLF?
Yes, the SAVE (Saving on a Valuable Education) plan is a qualifying repayment plan for the Public Service Loan Forgiveness (PSLF) program. Borrowers enrolled in the SAVE plan can work towards loan forgiveness under PSLF while benefiting from lower monthly payments based on their income and family size.
Payments made under SAVE count towards the 120 qualifying payments for PSLF.
SAVE offers the lowest student loan payments, especially for undergraduate loans, for most borrowers.
Borrowers can have loans forgiven tax-free after making the 120th qualifying payment while working full-time for an eligible employer over 10 years.
Related: PSLF Updates
How Do SAVE Plan Payments Count Towards PSLF?
Under the SAVE plan, your monthly payment is calculated based on your discretionary income and loan balance. Even if your required payment is $0 due to low income, it still counts as a qualifying payment towards PSLF as long as you are working full-time for an eligible employer.
Applying for PSLF does not change your calculated SAVE plan payment amount. But once you meet the requirements and apply for PSLF after 120 qualifying payments, the U.S. Department of Education will forgive any remaining balance tax-free, regardless of how much you paid under SAVE.
The lower SAVE payments, especially the 5% rate on undergrad loans, allow more borrowers to see significant forgiveness under PSLF compared to other income-driven plans. This makes SAVE an attractive option for borrowers pursuing PSLF.
Related: PSLF Qualifying Payments
How Does SAVE Compare to Other IDR Plans for PSLF?
The SAVE plan offers the lowest monthly payments among all income-driven repayment (IDR) plans, making it an attractive option for borrowers pursuing Public Service Loan Forgiveness. But high-income earners may find other repayment options more beneficial.
Under SAVE, undergraduate loans are repaid at 5% of discretionary income, while other IDR plans require 10% or more.
This means borrowers can make smaller payments and have more of their balance forgiven under PSLF when using the SAVE plan.
Related: Is SAVE and IDR the Same?
How Can You Enroll in the SAVE Plan for PSLF?
Signing up for the SAVE plan can be a strategic way to handle your student loans, especially if you’re aiming for the PSLF Program.
Here’s what you need to do:
Sign Up for the SAVE Plan
Visit the Student Aid Website: Log into your account at StudentAid.gov.
Choose a Repayment Plan: Click on “Apply for an Income-Driven Repayment Plan” from your dashboard.
Opt for SAVE: From the list of options, pick the SAVE plan and submit your application.
Annual Recertification: Remember to update your income and family size each year to keep your eligibility.
Estimate Your Monthly Payments: Use the Loan Simulator on the Student Aid website to figure out your monthly payments.
This tool lets you see your potential payments under different plans, including SAVE, Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment ICR, helping you choose the best one for your finances.
Steps to Qualify for PSLF While on the SAVE Plan
Verify Your Job: Fill out the PSLF form on StudentAid.gov to confirm you work for a qualifying employer.
Make 120 Qualifying Payments: These payments must be made while you’re employed full-time by an eligible employer.
Apply for Forgiveness: After your 120 payments, submit your application for PSLF.
Three things to keep in mind:
For PSLF eligibility, you need to make all qualifying payments under an income-driven plan like SAVE or the 10-Year Standard Repayment Plan. Payments under Extended or Graduated Plans don’t count towards PSLF.
Submit your PSLF form yearly or when you switch employers to track your qualifying payments.
You can either download, complete, and submit the PSLF form manually or use the online PSLF Help Tool to simplify the process.
PSLF Eligibility Requirements
To qualify for PSLF under the SAVE plan, you must:
Work full-time for a government or non-profit organization exempt under Section 501(c)(3) of the Internal Revenue Code.
Ensure your loans are Direct Loans or have consolidated other federal student loans into a Direct Consolidation Loan. Federal Family Education Loans (FFEL) and Perkins Loans must consolidated into a Direct Consolidation Loan before they become eligible for SAVE and PSLF. You can consolidate your loans for free on Federal Student Aid.
Make all qualifying payments under an income-driven repayment plan like SAVE.
How Do You Qualify for PSLF If Your SAVE Payment Is $0 a Month?
If your income is low enough that your calculated SAVE plan payment is $0, these $0 payments still count towards the 120 qualifying payments required for PSLF. As long as you are working full-time for a qualifying employer and submit the PSLF form annually, your $0 payments will bring you closer to loan forgiveness.
Will My SAVE Payments Change If I Apply for PSLF?
No, applying for PSLF does not directly change your monthly payment amount under the SAVE plan. Your SAVE payments are calculated based on your income and family size, regardless of whether you are pursuing PSLF. But keep in mind that you must be on an income-driven repayment plan like SAVE to be eligible for PSLF.
Related: Is SAVE and IDR The Same?
What Is a Qualifying PSLF Monthly Payment on the SAVE Plan?
A qualifying PSLF monthly payment on the SAVE plan is any payment made while you are enrolled in the SAVE plan, working full-time for a qualifying employer, and have submitted the PSLF form to certify your employment. This includes $0 payments if your income is low enough to qualify for them under the SAVE plan. The key is to make 120 of these qualifying payments to become eligible for PSLF loan forgiveness.
Related: SAVE Plan Income Limits
What Should I Do If My Employment or Income Changes While Pursuing PSLF?
f you switch jobs while working towards PSLF, check that your new employer qualifies. Then, submit a new PSLF form to confirm your job status.
When your income changes, update your income and family size with your loan servicer to adjust your SAVE plan payments accordingly.
As long as you meet the PSLF requirements, you’ll stay on track toward loan forgiveness.
Related: PSLF Qualifying Employers
Bottom Line
The SAVE plan is a game-changing student loan repayment plan for borrowers pursuing Public Service Loan Forgiveness.
By offering the lowest monthly payments among IDR plans and being fully compatible with PSLF, SAVE makes it easier for public service workers to manage their student debt and have more of their balance forgiven.
If you’re considering PSLF, be sure to explore the SAVE plan and see how it can work for you. Book a call if you want help figuring out the right strategy for your financial situation.
Blog
