The Biden Administration's New SAVE Repayment Plan: How You Can Cut Your Monthly Payment in Half

The Biden administration has recently rolled out a new student loan repayment plan called the Saving on a Valuable Education (SAVE) plan, designed to be more affordable for borrowers, with lower monthly payments and the potential for loan forgiveness after as little as 10 years.

How Does it Work?

The SAVE plan is a type of income-driven repayment plan, which means that rather than paying the traditional monthly payment on your student loan, you pay a percentage of your monthly discretionary income. If you have a lot of student loan debt (more than what you earn), or if your income is low, this could SIGNIFICANTLY reduce your monthly payment and free up some cash. The best part, whatever you don’t finish paying off is forgiven after 20 years of making payments.

What’s New in the New SAVE Plan?

Affordable monthly payments

Your monthly payments on the old SAVE plan are capped at 10% of your discretionary income, then new plan has reduced that number to 5%, saving you even more money! That's defined as the difference between your adjusted gross income and 225% of the federal poverty line. For borrowers earning $32,800 a year or less, or couples earning $67,500, your monthly payment will be $0.

Show Me the Money

Here’s an example of how your monthly payments might look, depending on your annual income.

Cap on Interest

The SAVE plan also caps the amount of interest that can be added to your loans each month. This means that even if you're only making the minimum payment, you won't have to worry about your balance growing out of control.


Loan Forgiveness

In addition to full balance forgiveness after around 20 years of payments, the new plan has added a new perk: after 10 years of payments on the SAVE plan, borrowers with principal loan balances of $12,000 or less may have it forgiven. The amount of time you need to make payments to qualify for forgiveness increases as your loan balance increases.

The Cons:

Not Available for All Borrowers

The SAVE plan is not available for Parent Plus borrowers, only to undergraduate students with loans under their name.

Monthly Payments Adjust as Income Changes

The SAVE plan is an income-driven repayment plan, so your monthly payment will go up if your income increases. You will have to re-certify your income every year so they can make sure they are charging you the correct amount. This is something to consider if you end up making a LOT more money - but not to worry, they will just change your payment back to what it would be under a regular student loan repayment plan so you will never end up losing out.

Borrowers with Mid-Level Balances May Not Benefit as Much

The SAVE plan is most beneficial for borrowers with low- and moderate-incomes, or with VERY high amounts of student loan debt. Borrowers with higher incomes may find that they can pay off their loans faster on the standard repayment plan.


Overall, the SAVE plan is a good option for borrowers who are looking for a more affordable way to repay their federal student loans. If you're interested in learning more about the SAVE plan, you can visit the Federal Student Aid website. You can also use the loan simulator tool to compare the SAVE plan to other repayment options and see which one is the best fit for you.

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