SAVE: What to Know About The New Student Loan Repayment Plan

Kyle Flynn, CSLP | Jul 11, 2023

The following will go into effect this Summer 2023 for SAVE specifically:

Borrowers currently on the REPAYE Plan will automatically get the benefits of the new SAVE Plan
Income exemption increases to 225% of the Federal Poverty Line
The plan eliminates 100% of unpaid interest on unsubsidized and subsidized loans after your scheduled payment
- For resident physicians, this can mean that your loan balance would not increase at all during training if you are enrolled in SAVE
Married borrowers filing taxes separately can exclude spousal income
- Spouses will no longer need to cosign, making it easier for spouses without an FSA ID

The following go into effect this Summer 2023 for all income-driven repayment plans:

Applications for a new plan this Summer will be processed in time for your first payment due date, though it may take a few weeks to process your application and income documentation
Automatic, scheduled, annual income re-verification where your loan servicer connects directly with the most recent tax return on file with the IRS
- Tax laws and date restrictions apply and this would start in 2024
- You can still electively update your income manually. This is often recommended for physicians returning to fellowship after having a tax return show a much higher income than their current PGY salary.
No interest capitalization when leaving an income-driven repayment plan
- One exception to this is the IBR (Income-Based Repayment) plan because capitalization is required by statute

The following updates are proposed for July 2024 for SAVE specifically:

Payments on undergrad loans will be cut in half by reducing the payment requirement to 5% of Discretionary Income
Borrowers with undergraduate & graduate loans will pay a weighted average between 5% (undergrad) and 10% (graduate)
- For physicians where a majority of their loans are from medical school, this may not be a large decrease. Positively, it will still have the income exemption at 225%.
Borrowers who consolidate will not lose progress toward forgiveness*
- The verbiage is complex, and we will see this calculation for those consolidating FFEL or government-generated Perkins loans, but the Department of Education states that:

“They will receive credit for a weighted average of payments that count toward forgiveness based upon the principal balance of the loans being consolidated.”

Here’s what has not yet been determined:

Will there be the same payment cap as Pay as You Earn (PAYE) and Income Based Repayment (IBR), which limits monthly payments to whatever a Standard 10 Year Repayment would be based on the principal amount?
Will residents of Community Property states be required to provide alternative income documentation in SAVE plans to exclude spousal income? Or can they use a recently filed tax return? How does this differ for spouses without federal loans? How does this differ for spouses with federal loans in a standard or extended repayment?
Are payments still expected in late July for borrowers recently approved for REPAYE and notified by MOHELA? Will there be processing time as they are switched to SAVE?
Will MOHELA or any state file lawsuits?

For early-career physicians entering repayment, now is the time to connect with a professional to ensure you’re on track with your loan repayment and/or forgiveness goals during one of the most hectic times of your career. Our team is happy to schedule a no-obligation, introductory call to answer questions about loan repayment and forgiveness strategies.

SCHEDULE A CALL

¹https://studentaid.gov/announcements-events/save-plan

Kyle is a registered representative and investment advisor representative of Securian Financial Services, Inc. 5792513/DOFU 7-2023