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  • Writer's pictureJim Carlson

Federal Student Loan News: The SAVE Plan

Washington headed for a car crash

We have some important news for you regarding federal student loans. With the pandemic coming to an end, the payments that have been suspended will soon be back in action. But don't worry, the Saving on a Valuable Education Plan (SAVE) is here to help.

What is the SAVE Plan?

The SAVE Plan is a federal Income-Driven Repayment (IDR) Plan that considers your income and family size to determine your monthly payment. This new plan is replacing the Revised Pay As You Earn Plan (REPAYE) and offers many benefits to borrowers.

Changes in the SAVE Plan

The Department of Education has approved the SAVE Plan to replace the REPAYE Plan. The new plan offers the lowest monthly repayment of any IDR plan out there. The plan is being rolled out in two parts, with the first changes happening this summer and the rest next year.

Redefining Discretionary Income

Discretionary income is the difference between your adjusted gross income and 150% of the poverty level. However, under the new plan, this will be changed to 225% of the poverty level, which means that borrowers will have to pay less.

Monthly Payment Cap

The monthly payment cap is the percentage of your discretionary income. The SAVE Plan is tweaking both the cap and the definition of discretionary income to make things easier for borrowers. Undergraduate loans will have a 5% cap of discretionary income over 225% of the poverty line in 2024, while graduate loans will have a weighted average between 5% and 10%.

Cap on Interest

The SAVE plan is also putting a cap on the interest part of the repayment. Any interest amount that's more than the monthly payment won't be charged under the SAVE plan. This means you'll be paying off your loans faster, as more of your money goes towards the principal of the loan.

Loan Forgiveness

The SAVE plan is also speeding up the track to loan forgiveness. If you have $12,000 or less in federal loans, your balances will be forgiven after ten years of loan payments. Every additional $1,000 above $12,000 adds another year onto the loan forgiveness timeline.

How to Enroll in the SAVE Plan

If you're already enrolled in the REPAYE plan, you'll be automatically switched over to the SAVE Plan. If you're not enrolled, you can enroll now and be automatically transferred, or you can wait until the SAVE application becomes available later this summer.

Other Ways to Handle Student Loans

Public Service Loan Forgiveness is another great way to tackle student loans, especially if you have a big balance. This plan is open to federal, state, local, and Tribal government and qualifying nonprofit employees with federal student loans. After ten years of work and 120 qualifying loan payments, the government will forgive the remaining loan balances for eligible borrowers.


The SAVE plan is going to make it easier for borrowers to pay off their student loans while also helping them move forward with their financial and lifestyle goals. Combining an income-driven repayment plan with Public Service Loan Forgiveness can get you there even faster. Remember, Carlson Planning Company is here to help you navigate these changes. We're all in this together!


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Carlson Planning Company, LLC is a Registered Investment Advisor domiciled in Massachusetts.


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