What Is the SAVE Plan for Student Loan Repayment?

The Saving on a Valuable Education (SAVE) Plan is a federal income-driven repayment (IDR) option designed to help federal student loan borrowers manage their monthly payments. This plan calculates payments based on a borrower’s income and family size, rather than their loan balance. Its primary purpose is to make loan repayment more affordable, offering benefits that can lead to lower monthly payments and a path to eventual loan forgiveness.

Core Features of the SAVE Plan

The SAVE Plan calculates monthly payments based on a borrower’s discretionary income and family size, rather than the total amount of debt owed. The amount of income considered discretionary is determined by subtracting a certain percentage of the federal poverty line from a borrower’s adjusted gross income (AGI).

The SAVE Plan offers increased income protection, safeguarding more of a borrower’s earnings from repayment calculations. Discretionary income is defined as the difference between a borrower’s AGI and 225% of the federal poverty guideline for their family size. This means a larger portion of income is protected and not considered available for loan payments.

Another key benefit is the interest subsidy, which prevents loan balances from growing due to unpaid interest. If a borrower’s scheduled monthly payment under SAVE does not cover the full amount of interest that accrues, the federal government covers 100% of the remaining interest for both subsidized and unsubsidized loans. This ensures that as long as borrowers make their required payments, their loan balance will not increase from accruing interest.

The SAVE Plan adjusts the percentage of discretionary income used for payment calculations based on the type of loan. For undergraduate loans, monthly payments are capped at 5% of discretionary income. For graduate loans, the payment remains at 10% of discretionary income. Borrowers with a mix of undergraduate and graduate loans will pay a weighted average between 5% and 10%, based on the original principal balances of their loans.

The plan also offers specific provisions for married borrowers who file their federal taxes separately. In such cases, spousal income is excluded from the discretionary income calculation. This simplifies the process and can potentially lower the calculated payment for the borrower.

The SAVE Plan includes an accelerated path to loan forgiveness for borrowers with smaller initial loan balances. Borrowers whose original principal loan balance was $12,000 or less can receive forgiveness after 120 payments (10 years). For every additional $1,000 borrowed above this amount, an extra year of payments is added, up to a maximum of 20 or 25 years, depending on whether the loans were for undergraduate or graduate study.

Determining Eligibility

To qualify for the SAVE Plan, borrowers must meet specific criteria related to their loan types. The plan primarily covers:
Direct Subsidized Loans
Direct Unsubsidized Loans
Direct PLUS Loans made to graduate or professional students
Direct Consolidation Loans that did not include Parent PLUS loans

Certain federal student loan types, such as Federal Family Education Loan (FFEL) Program loans, are not directly eligible. However, borrowers with these loan types can become eligible by consolidating them into a Direct Consolidation Loan. Parent PLUS loans are generally not eligible for the SAVE Plan.

Borrowers must not be in default on their federal student loans to enroll in the SAVE Plan. Borrowers already in default typically need to resolve their default status first. Eligibility for a $0 monthly payment is determined by comparing a borrower’s AGI to 225% of the federal poverty guideline for their family size. For example, an individual earning $32,800 or less annually may qualify for a $0 monthly payment.

Family size plays a significant role in determining both eligibility and the monthly payment amount, as it directly impacts the calculation of discretionary income. Borrowers include themselves, their spouse (if applicable and filing jointly), and any children or other dependents for whom they provide more than half of their support. The calculation also considers the borrower’s adjusted gross income, typically derived from their most recent tax return.

Preparing Your Application

Before starting the SAVE Plan application, gathering all necessary information and documentation is an important first step. Borrowers will need details regarding their federal student loans, including loan types and current balances.

Income verification is a key component of the application, as monthly payments are income-driven. Borrowers can typically provide their Adjusted Gross Income (AGI) from their most recently filed federal income tax return. If tax return information is not readily available or does not accurately reflect current income, alternative documentation may be used, such as recent pay stubs or a letter from an employer.

Information about family size is also required, as it directly influences the calculation of discretionary income. This includes the number of individuals in the household, such as a spouse and any dependents, whom the borrower supports. Ensuring this information is current and accurate is crucial for the correct payment calculation.

The official application for the SAVE Plan is primarily accessed through StudentAid.gov, the central online portal for federal student aid. Borrowers should navigate to the income-driven repayment plan application section on this website. The portal provides an interactive form that guides applicants through each step.

When filling out the application, it is important to accurately input all gathered details into the corresponding fields. This includes personal information, financial data, and family size. Reviewing each section carefully before proceeding helps prevent errors that could delay processing.

Submitting Your Application and Next Steps

Once all required information has been accurately entered into the SAVE Plan application, borrowers can proceed with submission. The primary and most efficient method for submission is online through StudentAid.gov. After completing all fields, the platform typically prompts the borrower to review their application for accuracy.

Following the review, borrowers will generally be required to electronically sign the application. This e-signature acts as a legal confirmation of the information provided. After signing, a final confirmation click usually submits the application to the loan servicer or the Department of Education for processing.

For those who prefer or need to submit a physical application, a printable version of the income-driven repayment plan request form can usually be found on StudentAid.gov. This completed form, along with any required supporting documentation, must be mailed to the borrower’s student loan servicer.

After submission, borrowers should anticipate a processing period, which can vary but typically ranges from a few weeks to a couple of months. The loan servicer will usually send a confirmation of receipt, often via email or postal mail. Borrowers can frequently check the status of their application by logging into their account on StudentAid.gov or by contacting their loan servicer directly.

During the processing phase, the loan servicer may contact the borrower to request additional information or clarification if anything is unclear or missing from the application. Promptly responding to these requests can prevent delays. Once the application is approved, the new monthly payment amount under the SAVE Plan will be communicated, and payment adjustments typically take effect with the next billing cycle.