Zenith Wealth Partners

Student Loan Update: SAVE Plan

With negative sentiments swarming after the Supreme Court decision on student loan forgiveness, the Biden administration is formulating hope and positive news for student loan borrowers. 

The new SAVE income-driven repayment plan will significantly reduce monthly payments and increase borrowers’ opportunities for forgiveness. Applications are open for the SAVE Plan, which will replace the popular REPAYE (Revised Pay As You Earn Repayment) Plan. 

What makes this income repayment plan unique?

  1. The new income calculator decreases your discretionary income and payments are capped at 5% of your discretionary income for undergraduate borrowers compared to the current 10% cap for the PAYE and REPAYE plans. 
  2. For borrowers with both undergraduate and graduate loans, the loan payment on the SAVE plan will be calculated using a weighted average based on your loans’ original balances.
  3. In terms of forgiveness, another notable piece of this repayment plan is that borrowers who originally borrowed $12,000 or less are eligible for forgiveness after 10 years instead of 20-25 years. An additional year is added for every extra $1,000 until $21,000 for undergraduate loans and $26,000 for graduate loans (Ex. undergraduate loans with a balance of $13,000 are eligible for forgiveness in 11 years).

As the SAVE plan is rolled out, other plans will be phased out. If you are currently enrolled in the REPAYE plan, you will automatically be moved into the SAVE plan before payments resume in October. The PAYE plan will be a thing of the past as new borrowers are unable to apply for the PAYE plan after July 1st, 2024. Annual income and family recertification will be automated through the IRS starting March 1st, 2024. Until then, borrowers can self-report income WITHOUT providing tax documentation, but beware because this will affect your payment. If you got a new job with higher pay, your spouse has a high-earning job, or your children are no longer dependents, do not self-report your income because your payment will increase once your information is submitted. However, if you were laid off last year, your income reduced, went through a divorce, or if you’ve had more children, it will be advantageous for you to self-report your current income to lower your monthly payment.

All written content is for information purposes only. Opinions expressed herein are solely those of Zenith, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

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