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Calculate Your Monthly Payment Under the SAVE Student Loan Repayment Plan

Calculate Your SAVE Plan Payment

Understanding the SAVE Plan for Student Loans

The Saving on a Valuable Education (SAVE) Plan is the newest and most affordable income-driven repayment (IDR) plan for federal student loans. Launched in 2023 as a replacement for the REPAYE plan, the SAVE Plan offers significant benefits to borrowers by lowering monthly payments and providing a clearer path to loan forgiveness.

What is the SAVE Plan?

The SAVE Plan is an income-driven repayment plan offered by the U.S. Department of Education that calculates your monthly student loan payment based on your income and family size rather than your loan balance. This plan is designed to make student loan payments more affordable and accessible to borrowers across all income levels.

Key Feature: The SAVE Plan protects more of your income than any previous IDR plan by raising the income protection threshold to 225% of the federal poverty guideline, meaning borrowers keep more of their earnings before payments begin.

How the SAVE Plan Works

The SAVE Plan calculation is based on your discretionary income, which is the difference between your annual income and 225% of the federal poverty guideline for your family size and state of residence. Here's the breakdown:

• Discretionary Income Calculation: Annual Income – (225% × Federal Poverty Guideline)
• Undergraduate Loans: You pay 5% of your discretionary income annually
• Graduate Loans: You pay 10% of your discretionary income annually
• Mixed Loans: A weighted average between 5% and 10% based on your loan composition
• Monthly Payment: Annual payment amount divided by 12 months

SAVE Plan Payment Calculation Example

Let's walk through a realistic example to understand how the SAVE Plan payment is calculated:

Example Scenario:
• Annual Income: $45,000
• Family Size: 1 person
• State: Contiguous 48 states
• Loan Balance: $35,000 (undergraduate loans)
• 2024 Federal Poverty Guideline (1 person): $15,060

Calculation:
1. Protected Income = $15,060 × 225% = $33,885
2. Discretionary Income = $45,000 – $33,885 = $11,115
3. Annual Payment = $11,115 × 5% = $555.75
4. Monthly Payment = $555.75 ÷ 12 = $46.31

This example shows that a borrower earning $45,000 with undergraduate loans would pay approximately $46 per month under the SAVE Plan, significantly lower than standard repayment plans.

Key Benefits of the SAVE Plan

The SAVE Plan offers several advantages that make it the most borrower-friendly income-driven repayment plan available:

• Lower Monthly Payments: By protecting 225% of the poverty guideline (up from 150% in previous plans), more borrowers qualify for $0 payments or significantly reduced amounts
• Interest Subsidy: If your monthly payment doesn't cover accruing interest, the government pays the difference, preventing negative amortization
• Faster Forgiveness for Small Balances: Borrowers with original balances of $12,000 or less can receive forgiveness after just 10 years (120 payments)
• Spousal Income Protection: Married borrowers filing separately don't need to include spouse's income
• No Capitalization: Unpaid interest never capitalizes (gets added to principal) while on the SAVE Plan

Federal Poverty Guidelines and Their Impact

The federal poverty guideline (FPL) is updated annually and varies by family size and location. The SAVE Plan uses 225% of this guideline to determine your protected income. Here are the 2024 guidelines for the contiguous 48 states:

• 1 person household: $15,060 → Protected income: $33,885
• 2 person household: $20,440 → Protected income: $45,990
• 3 person household: $25,820 → Protected income: $58,095
• 4 person household: $31,200 → Protected income: $70,200
• Each additional person: Add $5,380 → Add $12,105 to protected income

Alaska and Hawaii have higher poverty guidelines due to higher costs of living, which means residents of these states have higher protected income thresholds.

Who Qualifies for $0 Monthly Payments?

Under the SAVE Plan, you'll have a $0 monthly payment if your income is at or below 225% of the federal poverty guideline for your family size. This means:

• Single person earning $33,885 or less: $0 payment
• Two-person household earning $45,990 or less: $0 payment
• Three-person household earning $58,095 or less: $0 payment
• Four-person household earning $70,200 or less: $0 payment

Even with a $0 payment, you still receive credit toward loan forgiveness, and the interest subsidy prevents your balance from growing.

Loan Forgiveness Timeline Under SAVE

The SAVE Plan offers forgiveness based on your original loan balance and loan type:

• $12,000 or less original balance: Forgiveness after 10 years (120 qualifying payments)
• Each additional $1,000 borrowed: Add 1 year to forgiveness timeline
• Undergraduate loans only: Maximum 20 years to forgiveness
• Any graduate loans: Maximum 25 years to forgiveness

Example: If you borrowed $15,000 originally, you'd qualify for forgiveness after 13 years (10 years + 3 additional years for the $3,000 over the $12,000 threshold).

Undergraduate vs. Graduate Loan Calculations

The payment percentage differs based on your loan type:

• Undergraduate loans: 5% of discretionary income
• Graduate loans: 10% of discretionary income
• Both types: Weighted average based on the proportion of each loan type

For example, if you have $20,000 in undergraduate loans and $10,000 in graduate loans (total $30,000), your payment would be calculated as: (2/3 × 5%) + (1/3 × 10%) = 6.67% of discretionary income.

Comparing SAVE to Other Repayment Plans

Understanding how the SAVE Plan compares to other options helps you make informed decisions:

• SAVE vs. Standard 10-Year Plan: SAVE bases payments on income; Standard uses loan balance. SAVE usually offers lower payments but longer terms.
• SAVE vs. PAYE: SAVE protects more income (225% vs. 150% FPL) and has interest subsidy benefits PAYE lacks.
• SAVE vs. IBR: SAVE offers lower payments (5-10% vs. 10-15%) and better income protection.
• SAVE vs. ICR: SAVE is more affordable across all income levels and offers faster forgiveness for small balances.

How to Apply for the SAVE Plan

Enrolling in the SAVE Plan is straightforward and can be completed online through the Federal Student Aid website. Here's the process:

• Visit StudentAid.gov and log in with your FSA ID
• Navigate to the Income-Driven Repayment Plan Request
• Provide your income information (most recent tax return or pay stubs)
• Enter your family size and state of residence
• Review and submit your application
• Your loan servicer will contact you within 10 days with your new payment amount

Important: You must recertify your income and family size annually to remain on the SAVE Plan. Failure to recertify will result in removal from the plan and capitalization of unpaid interest.

Strategic Considerations for the SAVE Plan

While the SAVE Plan offers significant benefits, consider these factors when deciding if it's right for you:

• Career Trajectory: If you expect significant income growth, your payments will increase proportionally
• Public Service Loan Forgiveness (PSLF): SAVE payments count toward PSLF, making it ideal for public sector workers
• Tax Implications: Forgiven amounts may be taxable (though currently suspended through 2025)
• Marriage Considerations: Filing separately can protect spouse's income but may result in higher overall taxes
• Total Interest Paid: Lower monthly payments mean longer repayment and potentially more interest, though the subsidy mitigates this

Common Questions About SAVE Plan Calculations

Q: Does my loan balance affect my monthly payment?
A: No, your monthly payment is based solely on your income, family size, and loan type—not your balance. However, your balance affects your forgiveness timeline.

Q: What happens if my income changes during the year?
A: You can request a recalculation at any time if your income decreases significantly. If it increases, your payment will adjust at your next annual recertification.

Q: Are parent PLUS loans eligible for SAVE?
A: No, parent PLUS loans are not eligible for the SAVE Plan. However, they may qualify for the ICR plan if consolidated.

Q: How does the interest subsidy work?
A: If your monthly payment doesn't cover the interest that accrues each month, the government pays 100% of the remaining interest on subsidized loans and 100% of the remaining interest on unsubsidized loans (under SAVE's enhanced benefits).

Maximizing Benefits Under the SAVE Plan

To get the most out of the SAVE Plan, consider these strategies:

• Recertify on time: Set reminders for your annual recertification to avoid default payment increases
• Update family size changes: Marriage, divorce, or children can lower your payments by increasing protected income
• Consider tax filing status: Run calculations for both joint and separate filing to determine optimal tax strategy
• Track payments: Keep records of all payments for forgiveness documentation
• Combine with PSLF: If working in public service, the SAVE Plan provides the lowest payments while qualifying for 10-year PSLF forgiveness

Real-World Impact: Payment Scenarios

Let's examine how the SAVE Plan affects borrowers in different situations:

Scenario 1: Recent Graduate
Income: $35,000 | Loan Balance: $25,000 (undergraduate) | Family Size: 1
Discretionary Income: $35,000 – $33,885 = $1,115
Monthly Payment: ($1,115 × 5%) ÷ 12 = $4.65
This borrower saves hundreds compared to the standard plan's ~$265/month payment

Scenario 2: Mid-Career Professional
Income: $75,000 | Loan Balance: $50,000 (graduate) | Family Size: 3
Discretionary Income: $75,000 – $58,095 = $16,905
Monthly Payment: ($16,905 × 10%) ÷ 12 = $140.88
Significantly lower than the standard plan's ~$550/month while building toward forgiveness

Conclusion: Is the SAVE Plan Right for You?

The SAVE Plan represents the most generous income-driven repayment option available for federal student loans. With its enhanced income protection, interest subsidy, and accelerated forgiveness for small balances, it offers meaningful relief for millions of borrowers.

Use this SAVE Plan calculator to estimate your monthly payment and determine whether this plan aligns with your financial goals. Remember that your actual payment may vary based on exact poverty guidelines for your certification year and any income changes throughout the year.

The SAVE Plan is particularly beneficial for borrowers with lower incomes relative to their loan balances, those pursuing public service careers, and anyone seeking to minimize monthly payment obligations while working toward eventual forgiveness. By understanding how the calculation works and strategically managing your enrollment, you can maximize the benefits of this program and achieve greater financial flexibility.