Saving on Valuable Education Plan (SAVE): The Innovative Solution for Affordable Student Loan Repayment
The SAVE (Saving on Valuable Education) student loan plan can be a real financial lifeline for students grappling with the weight of their loans (Photo: Foundation for Economic Education)
New SAVE (Saving on Valuable Education Plan) Student Loan Plan – A Lifeline for Borrowers Struggling with Payments
According to Marketplace, the Saving on valuable education plan (SAVE), introduced by the U.S. Department of Education, offers a significant advantage to federal student loan borrowers by Saving on valuable education and preventing interest from accumulating and trapping them when they consistently make required payments. Approximately 70% of borrowers on income-driven repayment plans, even before the pandemic-related pause, stand to benefit from this change. Under the Saving on valuable education plan, if the mandatory monthly payment doesn’t cover the interest, the Department of Education stops charging the uncovered interest.
Moreover, the Saving on valuable education plan goes a step further by eliminating all remaining interest on both subsidized and unsubsidized loans after payment is made. This proactive approach, as noted by Bruce McClary of the National Foundation for Credit Counseling, directly addresses the issue of negative amortization.
Many borrowers saw their student loan balances grow significantly, especially under plans that didn’t cover monthly interest. This led to negative amortization, where low monthly payments increased overall debt over time, causing stress. While some may qualify for loan forgiveness, it’s not guaranteed. The Saving on valuable education plan prevents this debt cycle by addressing accumulating interest, offering a solution for borrowers.
What is SAVE? And Who Qualifies for SAVE? How to Apply
According to CBS News, the Saving on valuable education plan is aimed at helping borrowers reduce their monthly student loan payments, limit interest accumulation, and lower their lifetime repayment amount. To qualify, borrowers need federally held student loans, including Direct subsidized, unsubsidized, and consolidated loans, as well as graduate student PLUS loans.
Parents with federal PLUS loans aren’t eligible. Borrowers with FFEL or Perkins Loans held by commercial lenders must consolidate into a Direct loan. Notably, private student loans don’t qualify for the Saving on valuable education plan or any other federal repayment plan.
Borrowers who are already enrolled in the REPAYE repayment plan will be automatically switched to the Saving on valuable education plan once it becomes available later this summer. Borrowers can log in to StudentAid.gov and go to their My Aid page to see what repayment plan they are enrolled in. For borrowers who are not currently enrolled in REPAYE, you can now apply for the new Saving on a valuable education plan.