Millions Look Forward to Saving More with SAVE

Millions of borrowers on the new SAVE income-driven repayment (IDR) plan were notified this month that they don’t have to make their July student loan payment as they were placed on administrative forbearance. The reason: their payments are being recalculated as the newer repayment formula is introduced. The SAVE plan was introduced last year and touted a number of benefits, including a greater low-income exemption and waiving interest not covered by monthly payments. Now, the plan is coming into full effect and borrowers can look forward to spending less of their discretionary income on their student loans. 

Should I Enroll in SAVE Now or Later?

With this news that SAVE is coming into full effect, many will be tempted to enroll, but they may want to hold off. Some may fear the pending lawsuits brought by conservative states to block the plan, but the recent dismissal of Kansas’ lawsuit seems to indicate that they won’t succeed. Rather, some borrowers may actually see their monthly payments go up if they switch to SAVE now, even though it lowers the payment formula from 10-20% to 5-10% (based on the type of loan held).

For example,our client Dr. Darrell has over $250,000 in loans, but the last time he recertified his income, way back in 2020, he wasn’t working full-time. Because of that, his payment has been nice and low, just about $130 per month. Since then, he’s gone back to full-time work and his salary has grown—yay, Darrell! And since income recertifications have been postponed yet again until this fall, his payment has stayed at $130—double yay!! If he were to switch to SAVE right now, his current income would be used in the calculation and his payment would increase significantly. While switching to SAVE eventually will cost him less than his current PAYE plan, doing so right now would cut short his savings thanks to postponed income recertification. 

If you have questions about the new SAVE plan, income recertification, or anything else related to your student loan repayment, drop your student loan professional a line—they’re here to help guide you through the murky waters of payment plans and more!