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Harris: S.A.V.E.: Updated Information for Student Loan Repayment Plan


By Charlestien Harris

July 26 – When you saw the title, you probably thought, “How many ways can she talk about saving?” Well, this article is indeed about saving, but it focuses on the new details of the S.A.V.E. student loan repayment option. The good news is that the new S.A.V.E. income-driven repayment plan is set to expand.

Last year, the Biden administration introduced the Saving on a Valuable Education (S.A.V.E.) income-driven repayment (IDR) plan. This new plan offers much lower monthly payments compared to other IDR plans, and it also prevents unpaid interest from increasing loan balances. How about that for real savings? Repaying student loans can be a significant financial burden for consumers who are barely making ends meet with just the bare necessities.

The new S.A.V.E. plan replaces the Department of Education’s REPAYE plan, offering student loan borrowers a more affordable repayment option with additional benefits. In July, the U.S. Department of Education will expand key points of the plan to provide more relief to eligible student loan borrowers.
Here are four changes that you need to be aware of:

  • Reduced Payments: Who wouldn’t welcome the news of lower payments? Payments on undergraduate loans will be reduced from 10 percent of discretionary income to 5 percent. For borrowers with a mix of undergraduate and graduate debt, their payment will be a weighted average between 5 percent and 10 percent based on original loan balances. Lowering payments will allow borrowers to make adjustments to their monthly budget and possibly put aside funds to build or start a savings account.
  • Accelerated Forgiveness: This new plan will help speed up the progress of loan forgiveness. Borrowers with $12,000 or less in original debt can qualify for forgiveness in as little as 10 years, compared to 20 or 25 years on other IDR plans. This should significantly reduce the amount of interest and debt accumulation for borrowers.
  • Consolidation Won’t Reset the Clock: Under normal rules, when a borrower consolidates their loan(s), their repayment count is reset to zero. Under the updated, temporary rules, borrowers can consolidate without resetting their payment count. Borrowers who consolidate student loans before September 2024 will maintain their progress toward forgiveness.
  • Forgiveness Credits from Forbearance and Deferment: Borrowers who deferred student loan payments prior to July 1, 2024, will receive payment credits toward forgiveness. The same is true for borrowers who enter forbearance on or after July 1, 2024. This means that they will receive credit for repayments, and certain periods of forbearance and deferment, back to their initial start of repayment. Borrowers who consolidate student loans before September 2024 will be able to maintain their progress toward loan forgiveness.

You might be asking, “Why does it matter?” It matters because numerous consumers are saddled with a huge amount of student loan debt, which is literally affecting their ability to make ends meet, purchase a home, and save for future needs. The new S.A.V.E. plan is expected to reduce monthly payments for millions of student loan borrowers. As of February 2024, 7.5 million borrowers were enrolled in the S.A.V.E. plan, 4.3 million of whom have qualified for a zero-dollar payment. If you’re experiencing financial difficulties because of your federal student loan payments, the S.A.V.E. plan might help you maximize your savings.

It also matters because, whether you choose to get on an income-driven repayment plan or not, it’s important to make your student loan payments on time every month. If you’re late by 31 days or more, the late payment may get reported to the credit reporting agencies, which could damage your credit score.

For more information on this and other financial topics, visit www.banksouthern.com/blog. You can also email me at Charlestien.Harris@banksouthern.com or call me at 662-624-5776.

Until next week – stay financially fit!

Charlestien Harris is our financial contributor, a financial expert with Southern Bancorp Community Partners whose articles are seen in a number of publications around the region.