Getting Ready to SAVE Money with the New IDR Plan

There’s a new way to save money on your student loans, and it has an easy-to-remember name: SAVE! The “Saving on a Valuable Education” plan is the newest option for borrowers utilizing income-driven repayment to lower how much they owe each month. It takes some of the best elements from existing plans and combines them with lower payments to create a new, better-than-ever repayment plan, which is being rolled out incrementally over the next year. There are a number of great features to SAVE, but a couple that are especially worth noting are: 

• Any interest accumulation over and above your monthly payment will not be added to your loan balance, meaning that your balance won’t grow as long as you’re making regular payments. For example: If $50 in interest accumulates each month and you have a $30 payment, the remaining $20 would not be charged.
• A new repayment formula reduces the amount of money a borrower owes from 10-20% of their monthly discretionary income to 5-10% (depending on the types of loans held). This won’t take effect, however, until sometime before July 2024. 

Head to StudentAid.gov and Sign Up to SAVE

If you’d like to save money on your student loan payments, signing up for the new SAVE plan is quick and easy. If you’re currently on REPAYE—which is being replaced with the new plan—you’ll automatically be switched over, but everyone else will need to apply at studentaid.gov. The application only takes a few minutes, and also gives you a great opportunity to make sure all of your info is up-to-date. To keep things simple, you’re given the opportunity to link with your most recent tax return with the IRS. Proceed if your income has stayed roughly the same, but—if it’s gone down significantly—you can submit a recent pay stub later in the process to show your current income.

Once you’ve verified your income and contact info, you’ll need to review your loans. Remember: only Direct Loans qualify for IDR. If you have other types of loans, like FFELs, think about consolidating them before the end of the year to get them counted toward IDR forgiveness and PSLF. The application will also give you an opportunity to update your marital status and family size. Unlike REPAYE, the new SAVE plan doesn’t require you to report your spouse’s income if you file your taxes separately. 

If you qualify for multiple IDR plans, you’re given an opportunity to use the Repayment Estimator to help you decide which plan is right for you. It also shows which plan has the lowest monthly payment for you, but also which plan may save you the most money over time, including if you’re pursuing Public Service Loan Forgiveness. Once you’ve picked the plan you want, and review your information, all that’s left is to submit the application electronically. 

Make Sure You’re Ready for SAVE Before You Apply

Before you submit your application for any IDR plan, make sure that you’re 100% sure it’s the best course for you. While the Repayment Estimator is helpful, it doesn’t carefully examine the nuances of  your particular student loan situation; and while SAVE will likely offer the best savings for most borrowers, it won’t for all. You also don’t have to apply for it right now if it’s not going to save you money yet. If you’re a relatively new attending physician, for example, and recertified your income last when you were a resident, you might see a big spike in your monthly payment by applying for a new plan right now. Instead, you might be better off waiting until you have to recertify your income, rather than jump the gun and apply before you need to. One major drawback is that—like the old REPAYE—there is no payment cap on SAVE, so high-income earners will want to carefully crunch the numbers to see if it’s the right plan for them. Every borrower’s situation is unique; before you jump on SAVE, let student loan professionals make sure that now’s the best time to take the plunge.