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SAVE Income Based Student Loan Repayment Plan:  An absolute game changer!

The U.S. Department of Education has offered various income-based repayment plans for federal student loans borrowers for quite some time now. The goal of each of these plans is to calculate a monthly payment based on your income and make those payments for 20 years (10 if you are a public employee) and then receive student loan forgiveness.

A new plan was introduced recently that is an absolute game changer! The SAVE plan is designed to dramatically reduce monthly payments on your federal student loans for those qualifying for the program. The plan will not take full effect until July 2024; however, three key critical benefits have been implemented this summer before the student loan payment pause ends in August. Here are those benefits:

  • The amount of income protected will increase from 150% to 225% of the federal poverty guidelines;
  • Interest will be subsidized by the U.S. Department of Education on any monthly interest not covered by the monthly payment; and
  • Married borrowers who file their taxes separately will no longer be required to include their spouse’s income in their payment calculation.

Two other key benefits will take place in July, 2024:

  • Payments on undergraduate loans will drop from 10% of incomes about the 225% of the federal poverty guidelines to 5%; and
  • Borrowers with less than $12,000 in loans will receive forgiveness in 10 years, with an additional 12 payments for each $1,000 borrowed above that level, up to a maximum of 20 -25 years.

To put this in perspective, let us use the following example:

The borrower is married with two kids. His wife does not have any student loans. While the household income is $150,000 per year, his income is $100,000.

The federal poverty guidelines for a household of four are $30,000. $30,000 x 225% is $67,500.  The first $67,500 of his income is protected. The income used to calculate his monthly payment is $100,000 – $67,500 or $32,500.  Now his payment is calculated from 5% of the unprotected income. $32,500 x 5% = $1,625. So, $1,625 divided by 12 will be a monthly payment of $135.42.  The amount of savings under this program is nothing short of amazing.

If you would like to discuss how you would benefit from this program, please feel free to contact The Helbing Law Office.

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