Student Loan Stress? Meet SAVE

Stanley Tate
July 14, 2023

Before you rush off to the weekend, let me share two major developments that could revolutionize your financial landscape.

One is an unprecedented repayment plan that might be your ticket to relief, and the other...well, you'll need to read it to believe it.

First, up, let’s talk about the most budget-friendly student loan plan to date.

The wheels are in motion within the Biden administration to launch the new SAVE plan as quickly as possible. I've talked with supervisors from all the major servicers this week — including Aidvantage, MOHELA, Nelnet, and more — about when they anticipate implementing the plan for borrowers. Unanimously, they indicated that for those currently enrolled in the REPAYE plan, the switch would be effective by month's end.

I’m sure this is a huge relief for those of you worried about managing your student loan payments after a three-year break.

Over the coming weeks, we'll be launching a detailed blog post and an informative video to guide you further. Until then, here are the key points you should be aware of:

The Big Picture: President Biden's SAVE plan aims to revamp the way federal student loan repayment works. Lower payments, less interest, quicker forgiveness for smaller balances.
Payment Reduction: If you have an undergrad loan, your payment could be slashed by half. But hold your horses, this kicks in only from July 2024.
Interest Waiver: You won’t have to pay interest that accrues in a month beyond what’s covered by your monthly payment. The government will waive the unpaid interest every month — and that can limit a future tax bomb.
Grad Borrowers: If you're a graduate borrower, the 5% of income payment isn't for you. SAVE maintains your existing rate (10-20% depending on your plan).
Parent PLUS Borrowers: Sorry, no change here. You're still not included in SAVE — unless you explore the double consolidation loophole.
Phased Rollout: SAVE won't happen overnight. It'll be implemented in stages. The first set of changes will happen at the end of the month.
Sign-ups: From this summer, you can start enrolling in SAVE. If you're in REPAYE, you'll automatically be switched over.
Benefits from Summer: Increased income threshold for $0 payments and the new interest limits begin this summer. This means lower payments for lower-income borrowers.
Auto Enrollment: From 2024, you can allow the Education Department to use your tax info to auto-enroll you in the program every year.

Now that we know more about the SAVE plan, here’s a checklist of actions you can take:

Already on REPAYE? Great! Not yet? Consider switching to it now. Or wait for SAVE rollout.
If married, consider filing taxes separately. Spouse's income won't affect your SAVE payment.
Keep an eye on your income and household changes for timely recertification.
Reevaluate your repayment plan choice if your income has significantly increased.
Begin evaluating your tax filing status for 2023 and plan accordingly.

Prepare for more seismic shifts

The Education Department has started to notify specific borrowers eligible for a 20-25 year forgiveness under a new waiver.

Here’s an email the department sent to my client this morning:

What does this mean for you if you haven’t gotten this email?

Nothing yet. The department is working through updating accounts for nearly 43 million borrowers.

For now, keep an eye on your inboxes/mail. And if you’re a client of mine, I’ll keep an eye out as well.

Have an awesome weekend!