August 28, 2023
Question:
I’m on an income-based repayment plan. Should I consider enrolling in the new SAVE option?
Answer:
The answer to this question depends. Some things you may want to consider are the following:
Your payments will be calculated based on your income and family size.
The income exemption is 225% of the federal poverty line. Other repayment plans such as REPAYE and PAYE use 150%.
Your payments will be 10% of discretionary income (income minus the federal poverty level calculation) until July 1st, 2024.
After July 1st, 2024 you will pay 5% for undergraduate loans and 10% for graduate loans. If you have both undergraduate and graduate loans the payment will be based on a weighted average.
You can file your taxes married filing separately to exclude your spouse's income. (It’s important to note that if you do this you can’t include your spouse in your household size).
Loans will be eligible for forgiveness:
25 years if you have graduate loans.
20 years if you only have undergraduate loans, unless:
10 years if your original loan principal was under $12,000.
Each additional $1,000 of principal will add one additional year before forgiveness, up to 20 or 25 years.
If you leave the PAYE program you won’t be able to re-enter PAYE after July 1st, 2024.
Borrowers on REPAYE will automatically be enrolled in SAVE.
There is no cap on the monthly payment. This means that in some cases, if you have a high income your monthly payment may exceed what it would under the standard 10-year repayment.
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