The current Revised Pay As You Earn (REPAYE) Plan is scheduled to be replaced by the future Saving on a Valuable Education (SAVE) Plan, and current REPAYE borrowers will automatically switch to the new SAVE Plan.
The SAVE Plan determines your monthly payment depending on your salary and family size, similar to other income-driven repayment (IDR) plans. It is intended to accommodate a variety of student borrowers by providing the lowest monthly payments out of all the IDR plans that are currently offered.
There are several repayment options for borrowers of federal student loans to think about. These choices are contrasted here.
- Regular Repayment Schedule
All borrowers are eligible. Fixed payments made over a ten-year period. Beneficiaries are borrowers hoping to save interest costs by repaying loans more quickly.
- Gradual Repayment Schedule
All borrowers are eligible. Ten years of progressively higher payments after a smaller initial payment. Beneficiaries are borrowers eager to repay loans fast who anticipate increasing income.
- Extended period Repayment Strategy
All borrowers are eligible, with the exception of those with Federal Family Education Loan (FFEL) balances under $30,000. Up to 25 years of fixed or progressive payments. Beneficiaries are borrowers who need to make fewer monthly payments but have greater loan amounts.
- (PAYE) Pay As You Earn Repayment Plan
Borrowers who received a direct loan disbursement after October 1, 2011, are eligible. Standard Repayment amount, with monthly payments capped at 10% of discretionary income. Beneficiaries are people who want Public Service Loan Forgiveness or who need a low monthly payment.
- REPAYE, the updated Pay As You Earn Repayment Plan
Borrowers of Direct Loans who have Eligible Loans are eligible; Parent PLUS Loans are not included. Monthly payments of 10% of discretionary income. Married couples filing jointly with a larger aggregate income are not benefited.
- IBR or Income-Based Repayment Plan
Borrowers with a variety of loan kinds and high debt to income ratios are eligible. 10-year Standard Repayment amount with payments of 10% or 15% of discretionary income. After 20 or 25 years, you become eligible for Public Service Loan Forgiveness. Beneficiaries are people with high debt who want to qualify for Public Service Loan Forgiveness or who require lower monthly payments.
- ICR, or income-dependent repayment,
Borrowers of Direct Loans who have Eligible Loans are eligible; Parent PLUS Loans are not included. Payments are made at a rate of 20% of discretionary income or, in the event that this is less, a set amount dependent on income. Beneficiaries are borrowers who are interested in Public Service Loan Forgiveness and who can afford higher monthly payments than Standard Repayment.
- Income-Based Repayment Schedule
Borrowers of Federal Family Education Loans are eligible. Payments made over a 15-year period based on annual income.Beneficiaries are FFEL borrowers looking for lower monthly payments than under a Standard Repayment plan or a Graduated Repayment plan.
SAVE Plan to Lower Payments and Streamline Repayment
By July 2024, the forthcoming SAVE Plan is expected to introduce new benefits with the goal of streamlining payback and lowering payments. These advantages include:
- Payments on undergraduate loans will be cut in half, from 10% to 5% of income beyond 225% of the poverty level. Payments for borrowers who have both undergraduate and graduate loans will be a weighted average depending on original principal sums, varying from 5% to 10%.
- After ten years of payments, borrowers with original principal sums of up to $12,000 will have their balances forgiven. Every additional $1,000 borrowed results in a one-year extension of the forgiveness period. For instance, with a balance of $14,000, forgiveness will take place after 12 years, with both past and present payments taken into account.
- No amount of consolidation can stop you from forgiving someone. Consolidating borrowers will be given credit based on the weighted average of their aggregated debts’ payments.
- Forbearance and deferral periods will automatically result in forgiveness credit.
- To get credit for previous forbearance or deferment periods, borrowers might choose to make “catch-up” payments.
- If they have given the Department of Education permission to access their secure tax information, those who are 75 days late will be immediately registered in IDR.