The New SAVE Repayment Program: Lower Payments & Student Loan Forgiveness

Key Features of the SAVE Repayment Program

• SAVE is the most generous student loan repayment plan available.
• Parent PLUS borrowers and FFEL borrowers are excluded from SAVE.
• SAVE is being implemented immediately, with no delays.
• There are two versions of SAVE: 2023 and 2024.
• Borrowers in REPAYE are automatically converted to SAVE.

How the SAVE Plan Lowers Monthly Payments

The SAVE repayment plan calculates payments based on a borrower’s disposable income:

• 225% of the poverty guideline is deducted from a borrower’s adjusted gross income (AGI).
• In 2023, borrowers pay 10% of their remaining disposable income.
• In 2024, this percentage drops to 5%, reducing payments even further.
• Any excess interest that accrues beyond a borrower’s monthly payment is eliminated, effectively making loans interest-free for those with $0 monthly payments.

Who Qualifies for SAVE?

Not all borrowers are eligible for the SAVE repayment program:

• Parent PLUS loans are not eligible.
• FFEL loans and Perkins loans cannot be enrolled in SAVE unless consolidated into a Direct Consolidation Loan.
• Borrowers who consolidate Parent PLUS loans into a Direct Consolidation Loan are not eligible for SAVE.
• Borrowers with Direct Loans (not Parent PLUS) can enroll and benefit from SAVE.

How to Enroll in the SAVE Program

Enrollment for SAVE is available through the U.S. Department of Education’s website and student loan servicer portals. Borrowers can now apply online, where updated enrollment forms include the SAVE plan option.

SAVE Program Changes in 2024

Key 2024 Benefits:

• The income percentage for payments drops from 10% to 5%.
• Borrowers with $12,000 or less in student loans will only need to pay for 10 years before receiving full forgiveness.
• For every $1,000 in additional student loan debt, the repayment period increases by one year, up to 20 years for undergraduate loans and 25 years for graduate loans.

Forgiveness Timeline Examples:

• $12,000 loan balance → 10 years to full forgiveness.
• $13,000 loan balance → 11 years to full forgiveness.
• $22,000 loan balance → 20 years to full forgiveness.
• $27,000+ loan balance → 25 years to full forgiveness.

Automatic REPAYE to SAVE Conversion

As of August 1, 2023, borrowers in REPAYE have been automatically moved to the SAVE program. Many borrowers immediately saw a lower monthly payment due to the 225% poverty guideline deduction.

Potential Downsides of the SAVE Program

While SAVE is beneficial for most borrowers, there are a few considerations:

• Borrowers with high-income growth could pay more over time.
• Failing to recertify annually could result in being placed on the 10-year standard repayment plan, potentially increasing payments.

What This Means for Hope Credit Borrowers

Hope Credit clients should contact their case worker before October 1, 2023, when federal student loan payments resume. Borrowers currently in REPAYE will automatically benefit from lower payments under SAVE, but those in IBR, PAYE, or IBR for New Borrowers need to assess their options and take action.

Alternative Options for Parent PLUS Borrowers

Unfortunately, Parent PLUS borrowers are excluded from SAVE, but they may still qualify for:

• Public Service Loan Forgiveness (PSLF)
• IDR Account Adjustment
• Other loan relief options under federal policy changes

During this dynamic period of student loan policy reform, borrowers should remain informed about their eligibility for these programs and consult with financial aid experts for guidance.ch by the U.S. Department of Education to Borrower Defense to Repayment and Total and Permanent Disability Discharge than we’ve seen in several years.