The Savings for Value Education (SAVE) plan is an income-based student loan repayment plan introduced by the Biden administration. It replaced a similar plan called REPAYE. The SAVE plan offers more generous conditions than others student loan payment plans. It raises the minimum applicable income and helps cover interest that can quickly accumulate under other versions of income-based repayment. The goal of this program is to help reduce the overall burden of student debt.
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Income-based repayment is a form of student debt management based on your earnings. The Department of Education offers these programs to borrowers who have loans processed or offered by the federal government. Department of Education offers four income-based repayment plans:
Savings on a value education plan is the newest form of income-based repayment.
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Savings on a value education plan is the newest form of income-based repayment. It came into effect in August 2023 and replaced the previous Revised Pay As You Earn (REPAYE) plan.
The SAVE plan has two goals:
Lower your monthly payments
Reduce the impact of interest rates on graduates
If you qualify for this program, your principal will be completely forgiven after 10, 20 or 25 years of repayment, depending on the size of your loan.
Under the SAVE plan, your income is exempt student loan repayment up to 225% of the poverty line. This is an increase from 150% under REPAYE.
For example, in 2024. poverty line for an individual is adjusted gross income (AGI) of $15,060. Since most households take the standard deduction, $14,600 for an individual in 2024, a representative individual would reach the poverty line at approximately $29,060 in pre-tax earnings. So under the SAVE plan, this graduate would owe $0 in student loan debt on:
AGI of $33,885 per year ($15,060 *225%)
Pre-tax income of $48,485 ($15,060 * 225% + $14,600)
For individuals who owe money under SAVE, monthly payments are based on discretionary income. This is defined as the difference between your AGI and 225% of the poverty line for your household size.
For example, as noted above, an individual’s student loan exemption will begin at an AGI of $33,885. If they had an AGI of $50,000, their discretionary income would be $16,115.
It actually means that the household student loan payments apply only to their income dollars above the 225% poverty line. Because federal poverty guidelines are based on household size, the discretionary income limit increases with family size.
For most eligible loans, payments are set at 5% (for undergraduate loans), 10% (for graduate loans), or a weighted average (for both undergraduate and graduate loans) of your discretionary income. For example, in our case above, an individual would owe about $134 per month ($16,115 * .1 = $1,611 / 12 = $134).
Most income-based repayment plans do not fully address interest capitalization. This means that if your income reduces your payments below the monthly loan interest (in the case of a high principal, high interest student loan), the loan can grow even while you are paying the full amount.
The SAVE plan eliminates this problem. When you make a full payment under the SAVE plan, all remaining interest for that month is eliminated. For example, let’s say you owe $1,000 in interest per month on eligible loans. This could be a standard law or medical school graduate carrying $150,000 in debt at 8% interest. If you only pay $800 per month, the remaining $200 will be eliminated.
For eligible students, the SAVE plan is probably the most effective plan currently offered. The existing REPAYE format has been greatly improved, by raising the income ceiling and expanding interest coverage.
Any graduate who has an eligible loan can qualify for SAVE. The following loans qualify or may qualify if you consolidate them into a direct loan:
Direct subsidized loans
Direct unsubsidized loans
Direct PLUS loans for graduate students
Direct Consolidation Loans that are not repaid to parents
Subsidized Federal Stafford Loans
Unsubsidized Federal Stafford Loans
FFEL Plus loans for graduate students
FFEL consolidation loans
Federal Perkins Loans
No defaulted loan qualifies for SAVE. If your loans are outstanding, you can use A new beginning program for updating your loans.
At between 5% and 10% of income, SAVE’s repayment terms are more generous than other income-based repayment plans, which typically set repayments at 10%, 15% or 20% depending on your circumstances. And other plans, such as IBR and ICR, typically offer forgiveness only after 20 years of repayments or more.
In addition, SAVE releases more revenue than other plans of the Ministry of Education. While all income-based repayment plans are based on discretionary income, defined as the difference between AGI and a percentage of the federal poverty line, the SAVE plan sets more generous terms. Under IBR and PAYE, only the first 150% of the poverty line is exempt. And the ICR only exempts income up to 100% of the poverty line.
For most borrowers, SAVE will offer better terms than other income-based repayment plans. Actually, one analysis Student Loan Planner has determined that under each standard profile, the SAVE plan offers terms that are at least as good as other options.
A graduate reviews a plan to save on valuable education.
The SAVE Plan is a relatively new income-based repayment plan that helps graduates manage their student loans. For most borrowers, it offers the most generous terms of any income-based repayment plan.
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