In June, the Supreme Court struck down President Joe Biden’s $400B student debt forgiveness plan — but Biden’s Department of Education (DoE) had Plan B ready: Saving on a Valuable Education (SAVE). This new student debt payment option aims to bring relief to millions of borrowers who recently resumed their student loan payments.

SAVE who and how? The repayment program allows student loan recipients to pay based on their “discretionary income” — a formula that considers the federal poverty level, family size and tax deductions. And many SAVE borrowers are paying significantly less than before (or nothing at all) — all without accruing interest.

Consistent monthly payments under SAVE will lead to automatic forgiveness of the remaining loan balance in “as little as ten years.” Since launching in August, over 5.5M borrowers (of the 45M Americans holding student loans) have enrolled in the program:

• Average participants are saving $102/mo compared to the plan’s predecessor — or $1,224 yearly on their loans.
• 52.7% of SAVE members have a $0 payment — which applies to single borrowers with an income under $32.8K or a family of four with an annual income under $67.5K.

SAVE smarter, not harder

The approach is built with lower earners in mind, but parents and retirement savers could also benefit. The program’s “discretionary income” component factors in family size and “above the line” deductions — so savvy borrowers can game their SAVE bills by investing in pre-tax retirement plans or deducting expenses from side hustles.

New plan, new savings: Changes coming next July will cut monthly payments even further — borrowers will only need to pay 5% of their discretionary income or half their current rate. But because it’s an income-driven repayment plan, it’s less suitable for those earning six figures or more. Use EDCAP’s SAVE Plan Calculator or the DoE’s FSA Calculator to estimate potential savings.