What Borrowers Should Know About the End of SAVE Student Loan Plan

The Biden administration's Saving on a Valuable Education (SAVE) repayment plan, launched in 2023 to ease student loan burdens, has been officially discontinued. This affects approximately 8 million federal student loan borrowers who had anticipated lower monthly payments and reduced lifetime costs.

Under income-driven repayment (IDR) plans, many borrowers have enjoyed $0 monthly payments since March 2020 if their income fell below certain thresholds. SAVE aimed to extend this benefit to millions more, but with its demise, borrowers currently enrolled in SAVE should expect their monthly payments to increase.

Experts anticipate that the federal student loan payment pause will continue until at least December 2024, with some projections extending repayment resumption to mid-2026. Regardless of timing, borrowers must prepare for higher monthly payments once repayment restarts.

Repayment Options After SAVE

With SAVE no longer available, borrowers will need to switch to other income-driven repayment plans or standard repayment options. The main income-driven plans include:

• Income-Based Repayment (IBR)
• Pay As You Earn (PAYE)
• Income-Contingent Repayment (ICR)

Each plan has unique eligibility criteria and repayment formulas. Many borrowers will face higher monthly payments compared to SAVE. Alternatively, borrowers may choose non-income-driven plans like the standard, graduated, or extended repayment plans, though these often result in higher payments or longer terms.

Estimating Payment Increases

Using a typical example of a single filer earning $60,000 annually with a $30,000 loan at 6.53% interest, monthly payments under SAVE would be about $217 or less. Switching to other plans could increase payments to between $70 and $370 monthly, depending on the plan chosen.

For example, the Income-Contingent Repayment plan would require a monthly payment of $290, totaling $43,919 over the loan term. Income-Based Repayment and Pay As You Earn plans would both require $312 monthly, totaling $41,473. Standard repayment demands $341 monthly over 10 years.

Extended repayment plans offer lower monthly payments but can double the total amount paid due to longer terms, sometimes stretching to 25 years.

Refinancing Considerations

While refinancing with private lenders may appeal to some borrowers seeking lower interest rates, experts advise caution. Refinancing federal loans forfeits access to federal benefits such as income-driven plans, payment pauses, and loan forgiveness programs like Public Service Loan Forgiveness (PSLF). This can create financial risk, especially for those with fluctuating incomes.

Preparing for Higher Payments

Borrowers who have benefited from $0 payments since March 2020 should start preparing for repayment resumption. Recommended steps include:

1. Use the Department of Education's loan simulator to estimate your new monthly payment.
2. Consult nonprofit advisors like Edvisors or The Institute of Student Loan Advisors for personalized repayment guidance.
3. Discuss tax strategies with a student loan advisor and accountant to potentially reduce your adjusted gross income.
4. Review your budget to identify areas to cut costs or adjust savings and debt repayment plans.

Staying informed and proactive is crucial as federal student loan policies evolve. Borrowers should monitor legislative developments that may alter repayment options and plan accordingly.