The U.S. Department of Education recently announced the Saving on a Valuable Education (SAVE) Plan to assist student loan borrowers with direct loans in paying their loan balances. Similar to other Income Driven Repayment (IDR) plans, monthly payments are calculated based upon your income and family size. However, the method by which the payments are calculated will significantly reduce payments for most borrowers. Enrollees will have their income reduced by 225% of the federal poverty line rather than the current 150% reduction. This formula means that a single borrower earning $32,800.00 annually will not owe any payments. Others will likewise see their payment reduced based on family size.
The SAVE Plan will automatically replace the REPAYE plan, so no action needs to be taken by borrowers enrolled in this program. Others can enroll in the beta version of the updated IDR application available now at https://studentaid.gov/idr/ if you are not in a plan or if you participate in another IDR plan.
Other benefits include an end to capitalized interest payments not paid through monthly payments, automatic recertification upon approval of secure disclosure of tax information, and a recalculation of loan balances for borrowers with relatively small balances. If a borrower goes 75 days without making a payment, he or she will automatically be enrolled in the SAVE Plan if secure disclosure of tax information is authorized. Many borrowers will see relief in the form of forgiveness for periods of time in the past when they were placed in deferment status.
The first step in determining the full benefits of the SAVE Plan is to establish your payment status at StudentAid.gov. At this site, you can confirm whether you are enrolled in a program. You can also research which program is best for you on the Loan Simulator. And if you need help navigating your options, contact us. We give second chances on Second Street.