More affordable payments
The best news first: the SAVE Plan was designed to offer the most affordable payments of any income-driven plan for “nearly all student borrowers,” according to the Department of Education. The SAVE Plan increases the amount of income that is exempt when calculating your payment (known as “discretionary income”).
The Department of Education notes that single borrowers who make $15/hour or less will have $0 payments if they enroll in the SAVE Plan, and other borrowers can still expect to see a lower monthly payment than on other plans.
The even better news? These payments are expected to be further reduced next summer. The SAVE Plan is set up for these initial payments to be cut in half starting in July 2024.
Balance won't grow due to unpaid interest
One of the biggest frustrations many people have with income-driven repayment plans is that if their monthly payment cannot cover all the interest that accumulates each month, their loan balance can actually grow even when they have made all their payments on time and in full every month.
The SAVE Plan addresses this frustration by eliminating any remaining interest that is not covered by the monthly payment. For example: if your loans accumulate $100 in interest every month, but your payment under the SAVE Plan is only $75, that $25 difference will be eliminated if you make the payment due as agreed.
While this does mean your loan balance won’t really be going down (as the payment is just going to interest charges), the balance also won’t be growing – a key benefit of this new plan.
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