The SAVE program is being phased out under the One Big Beautiful Bill Act. If you are currently enrolled in a SAVE plan, interest collection resumes on August 1, 2025 and you have until July 1, 2028, to switch to a new plan.
The Saving on a Valuable Education (SAVE) program was launched by the Biden administration in 2023 to help federal student loan borrowers save money on their loan payments.
It offers updated repayment exemption rules, lower monthly payment amounts, and quicker forgiveness options.
Erika Taught Me
- SAVE lowers loan payments to as low as $0 per month.
- Undergraduates only need to pay 5% of their discretionary income per month; graduates need to pay 10%.
- SAVE offers loan forgiveness to borrowers with initial loan balances of $12,000 or less.
- Not all federal loans qualify — parent loans and loans in default are not eligible.
What Is the Saving on a Valuable Education (SAVE) Plan?
The Saving on a Valuable Education program is an income-driven repayment (IDR) plan for federal student loans that helps lower payments for certain borrowers.
It was launched in August 2023 in response to the Supreme Court shutting down President Biden’s student loan forgiveness plan.
The SAVE program replaces the old REPAYE income-driven repayment plan, helping lower the monthly student loan bill for millions of Americans.
The monthly payment calculation lowers the payment amount to only 5% to 10% of discretionary income for borrowers.
Some borrowers may even have their payments cut down to $0 based on their circumstances.
Payments are based on a borrower's income and family size and are available to any borrower with a Direct loan in good standing (i.e., caught up on payments).
Details of the SAVE plan
- Lower monthly payments. Previous plans required a minimum payment of 10% of your discretionary income for undergraduate loans, while the new SAVE plan only requires a minimum payment of 5%.
- Interest is not capitalized. If your monthly payment doesn’t cover all of the interest on your loans, the interest is not added to your loan balance (but will accrue separately) — meaning, your student loan interest will not compound.
- More borrowers with $0 payments. The new income formula for the SAVE plan is based on 225% of the federal poverty level (FPL), compared to the 150% figure used by the old REPAYE plan.
- Forgiveness becomes easier. Income-driven repayment plans offer forgiveness of remaining federal student loan debt. For undergraduate student loans, the remaining balances are forgiven after 20 years, while graduate student loans are forgiven after 25 years.
How the SAVE Plan Works
SAVE plan replaces REPAYE, offering lower payments and flexible repayment for federal student loan borrowers. While other plans are available, borrowers enrolled in an IDR plan will likely find the SAVE plan to be the best option.
Undergraduates pay 5%, and graduates pay 10% of their discretionary income.
With an adjusted gross income below 225% of the poverty line, borrowers may achieve a $0 monthly payment on the SAVE plan. The number is adjusted based on family size as well.
For example, a family with two adults and two kids with an AGI of $67,500 or less would also qualify for $0 monthly payments.
How To Enroll in the SAVE Plan
For borrowers who were enrolled in the REPAYE plan, their IDR plans will automatically switch to the SAVE plan.
For borrowers who aren’t currently enrolled in the SAVE plan, they can do so through the IDR application on the Studentaid.gov website.
Who is eligible for the SAVE plan?
All eligible federal student loan borrowers in good standing can benefit from the income-driven SAVE plan.
Eligible student loan types:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct PLUS Loans made to graduate or professional students
- Direct Consolidation Loans that did not repay any PLUS loans made to parents
These federal student loans are eligible if consolidated into a Direct Consolidation loan:
- Subsidized Federal Stafford Loans from the Federal Family Education Loan (FFEL) program
- Unsubsidized Federal Stafford Loans from FFEL
- FFEL PLUS Loans made to graduate or professional students
- FFEL Consolidation Loans
- Federal Perkins Loans
These federal student loan types are NOT eligible for the SAVE program:
- Direct PLUS Loans made to parents
- Direct Consolidation Loans that repaid PLUS loans made to parents
- FFEL Program Loans, while certain types can become eligible if consolidated, may have specific considerations.
- Federal Perkins Loans (can become eligible if consolidated)
- Any loan that is currently in default
READ MORE: Federal vs. Private Loans
SAVE vs. REPAYE
The SAVE program improves upon the REPAYE plan, and the SAVE program automatically enrolled all applicants who were on the REPAYE plan.
Here’s how the programs compare:
| (Old) REPAYE Plan | (New) SAVE Plan | |
|---|---|---|
| Minimum payment | 10% of discretionary income | 5% of discretionary income for undergraduate loans10% of discretionary income for graduate loans |
| Income exemption | 150% of the federal poverty line | 225% of the federal poverty line |
| Loan forgiveness | 20 years for undergraduate loans25 years for graduate loans | As soon as 10 years (120 payments) for undergraduate loans with a starting balance of $12,000 or below. Regular loan forgiveness at 20 years for undergraduate loans, 25 years for graduate loans |
| Unpaid interest | Capitalized (added to the loan balance) | Not capitalized |
Pros and Cons of SAVE
While generally regarded as an improvement over the preceding REPAYE plan, the SAVE program has limitations. Here are some of the pros and cons of SAVE:
Pros
- Lower monthly payments. Monthly payments may drop as low as $0 for some borrowers.
- High-income exemptions. The income exemption is now 225% of the federal poverty level.
- Forgiveness may happen sooner. Loan forgiveness is now as short as 10 years for borrowers with initial loan balances below $12,000.
Cons
- Not all federal loans qualify. Loans made to parents aren’t eligible for the SAVE program. Additionally, loans in default cannot enroll in the SAVE program.
- Loan forgiveness is taxable. Loan forgiveness is beneficial, but it counts as taxable income upon receipt.
- Not as generous for graduate students. The borrower's discretionary income dictates a minimum payment equivalent to 10% for graduate student loans. This is the same as other IDR plans.
FAQs
Does the SAVE plan forgive loans?
The SAVE student loan program is an income-driven repayment plan that offers a lower monthly payment to some borrowers and provides a fast path for loan forgiveness.
Borrowers with less than $12,000 in qualifying federal student loans can achieve forgiveness after 120 consecutive on-time payments. For every $1,000 borrowed over $12,000, you will need to make an additional 12 payments.
Regular loan forgiveness is still available after 20 years for undergraduate loans, and 25 years for graduate loans.
Who qualifies for the SAVE plan?
Eligible federal student loan borrowers with specific loan types can enroll in the SAVE plan. For undergraduate loans, borrowers pay only 5% of their discretionary income, while for graduate loans, it's 10%.
Depending on your income and family size, the SAVE program may reduce your monthly payment to as low as $0.
Learn With Erika
- Free Travel Secrets Workshop
- Learn how to use the fine print to book your next vacation practically for free with Erika's step-by-step system
- Free 5 Day Investing Challenge
- Learn how to get started as a beginner investor and make your first $10,000
- Free 5 Day Savings Challenge
- Discover how you can save $1,000 without penny pinching or making major life sacrifices
- Join Erika Kullberg Insiders
- Ask investing questions, share successes and participate in monthly challenges and expert workshops
