Should You Switch from SAVE to IBR Now that Interest is Resuming?

Starting August 1, 2025, your loans in the SAVE Plan will resume accruing interest, ending several years of zero-interest forbearance. As a result, many SAVE borrowers are evaluating whether switching to Income-Based Repayment (IBR) is now the smarter choice.

Previously, SAVE’s main advantage was its substantial interest subsidy, but that subsidy no longer applies. Additionally, recent legislative changes have simplified switching to IBR by removing the partial financial hardship requirement, previously a barrier to eligibility.

Borrowers nearing loan forgiveness milestones — such as Public Service Loan Forgiveness (PSLF) or 20–25 year IDR forgiveness — should carefully evaluate the timing and payment implications of switching plans. Moving into IBR could stabilize monthly payments and protect progress toward forgiveness, especially since IBR remains unaffected by the current legal challenges impacting SAVE.

Here are the primary differences between SAVE and IBR to help you decide which plan aligns better with your goals:

• Interest Subsidy: Under SAVE, unpaid interest was previously subsidized, preventing loan balances from growing over time. This subsidy ends August 1, 2025, meaning your loan balance will again accumulate unpaid interest. IBR does not offer this subsidy.

• Monthly Payments: SAVE payments are typically lower, ranging from 5% to 10% of discretionary income. In contrast, IBR requires higher monthly payments, usually between 10% and 15%, potentially increasing your immediate monthly financial burden.

• Forgiveness Timeline: Both SAVE and IBR offer forgiveness after 20–25 years, depending on loan type and borrowing date, but ongoing legal challenges currently complicate SAVE’s forgiveness processing.

• Eligibility Requirements: Previously, IBR required demonstrating partial financial hardship. Recent legislative changes eliminated this requirement, broadening access to more borrowers.

Related: How IDR Forgiveness Works

Switching from SAVE to IBR immediately most benefits borrowers who are very close to achieving loan forgiveness milestones—like PSLF or general IDR forgiveness—and want to eliminate uncertainty caused by ongoing policy changes and legal challenges. It also directly benefits borrowers concerned about rapidly growing loan balances who prioritize stable monthly payments over short-term savings.

But the decision isn’t straightforward for everyone.

Borrowers who prioritize minimizing monthly payments and are comfortable with balance growth due to interest accrual, or those strategically waiting for additional clarity on policy developments, may prefer to remain in SAVE longer.

Switching directly from SAVE to IBR typically does not trigger immediate interest capitalization. But if you later switch again — from IBR to another repayment plan — your accrued unpaid interest may capitalize, increasing your loan’s principal balance, monthly payments, and overall repayment cost. Awareness of this potential impact can inform your decision about whether switching now aligns with your financial goals.

Related: What is Capitalized Interest on a Student Loan?

Switching from SAVE to IBR can affect your forgiveness timeline, extending how long you’ll repay and potentially increasing the total amount paid, depending on your circumstances:

• SAVE Borrowers (Undergraduate Loans Only): Under SAVE, borrowers with only undergraduate loans have a 20-year forgiveness timeline. Switching to the older IBR plan (15%) extends forgiveness to 25 years. If you’re eligible for the newer IBR (10%), your timeline typically remains 20 years.

• PAYE (Pay As You Earn) Borrowers: PAYE provides a 20-year forgiveness timeline. If you’re currently eligible for PAYE but only qualify for the older IBR (15%), switching extends your forgiveness timeline from 20 to 25 years.

• Other SAVE Borrowers (Graduate or Mixed Loans): If your forgiveness timeline under SAVE is already 25 years, switching to IBR typically won’t affect your timeline, provided you qualify for the same repayment terms.

Marital status significantly impacts repayment calculations under SAVE and IBR, especially regarding your tax-filing strategy:

• Filing Jointly: Both SAVE and IBR include your spouse’s income when calculating your monthly payments, potentially increasing your obligation if your spouse earns significant income.

• Filing Separately: Under IBR, filing taxes separately allows you to exclude your spouse’s income from payment calculations, likely reducing your monthly payments. But filing separately often means losing access to valuable tax credits and deductions — like the Earned Income Tax Credit or the American Opportunity Tax Credit — which could increase your annual tax liability.

Note for Borrowers in Community-Property States: If you reside in one of the nine community-property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin), filing separately may still result in part of your spouse’s income being considered for your student loan payments.

SAVE generally follows similar rules to IBR regarding marital income inclusion, though there can be slight differences, particularly when both spouses have federal student loans and file separately. For clarity on your specific situation, consult a qualified tax professional before choosing your filing status.

Deciding whether switching from SAVE to IBR is right for you involves weighing multiple personal factors, such as your income stability, loan forgiveness timeline, marital status, family structure, and even your emotional relationship with debt. Given the complexity, there’s no simple, universal answer.

To simplify your decision, start by using the Department of Education’s Loan Simulator to compare projected monthly payments, total repayment costs, and forgiveness timelines under both SAVE and IBR. This will help you visualize how each plan impacts your finances.

For deeper, scenario-based insights and structured guidance that addresses the nuances of your unique situation, explore our Student Loan Playbook. The Playbook breaks down complex decisions into clear, actionable steps and real-world borrower examples, helping you confidently choose your repayment path.

Purchase the Student Loan Playbook ($30) here →

The future of Biden’s Saving on a Valuable Education (SAVE) Plan is uncertain. Courts may strike it down, and an incoming Trump administration has shown little interest in keeping it alive or replacing it with the Revised Pay As You Earn Plan or a different repayment plan altogether. This leaves you and millions more federal student loan borrowers facing instability and tough decisions.

If you’re thinking about switching from SAVE to IBR, your goal is likely to minimize costs while working toward forgiveness. SAVE offers the lowest payments and interest subsidies for now, but exploring IBR may be necessary as its future remains unclear. The decision depends on your financial situation, timeline, and tolerance for uncertainty.

Student loans are complex, but getting clarity doesn’t have to be.

Book a call with a student loan expert today.

Related reading:

• IBR Income Limits Explained

• Disadvantages of Income-Based Repayment

• Does Sallie Mae Offer Income-Based Repayment?

• How to Get Income-Based Repayment for Parent PLUS Loans

• Private Student Loan Income-Based Repayment Isn’t a Thing