Biden’s SAVE Plan in 2025: Navigating the New Income-Driven Repayment Option
Notice: The SAVE Plan was recently revoked by the Department of Education and borrowers can no longer apply for this plan. The following article is intended to inform borrowers about the SAVE Plan in order to understand their repayment options as a whole.
What Is the SAVE Plan?
The SAVE Plan stands for Saving on a Valuable Education. It is a new Income-Driven Repayment (IDR) plan created by the Biden administration. It replaced the old REPAYE Plan and is the most affordable IDR plan available.
This plan lowers your monthly payment based on your income and family size. In some cases, your monthly payment could be as low as $0.
However, big changes were made to the SAVE plan in the last year that seriously impact your options. Read on to learn more!
How Does the SAVE Plan Work?
Your monthly payment is based on a percentage of your discretionary income. That’s your income after basic living costs are subtracted.
With SAVE, more of your income is protected. The plan only uses income above 225% of the federal poverty level to calculate your payment. This means that a smaller amount of your income is actually being used to figure out what you can afford.
If you have only undergraduate loans, your payment is just 5% of your discretionary income. If you have graduate loans, it’s 10%. If you have both, the payment is a mix of the two.
SAVE Plan vs Other IDR Plans
The SAVE Plan offers major improvements over older plans like IBR and REPAYE:
- Lower monthly payments (5% vs. 10%-15%)
- More income protected (225% vs. 150%)
- No interest growth if your payment doesn’t cover the interest
- No spousal income is counted if you file taxes separately
- Faster forgiveness for smaller loan balances
Who Qualifies for the SAVE Plan?
Most federal student loan borrowers qualify. You must have:
- A Direct Loan (Subsidized, Unsubsidized, Grad PLUS, or Consolidation)
- Loans that are not in default
If you have FFEL or Perkins Loans, you must consolidate into a Direct Loan first. Parent PLUS loans do not qualify for SAVE.
How to Calculate SAVE Plan Payments
Let’s say you are single and make $40,000 per year.
- The poverty line (225%) for a single person is about $33,000
- Your discretionary income is $7,000
- 5% of $7,000 = $350 per year, or about $29/month
If you make less than the poverty level, your payment could be $0/month.
Also, any unpaid interest is subsidized each month. That means your loan balance will not grow, even if your payment doesn’t cover the interest.
SAVE and Student Loan Forgiveness
SAVE includes built-in forgiveness options:
- If you originally borrowed $12,000 or less, your loans can be forgiven after 10 years of payments
- Each additional $1,000 borrowed adds 1 more year of payments
- All undergraduate loans are forgiven after a maximum of 20 years
- Loans with any graduate debt are forgiven after a maximum of 25 years
SAVE also helps borrowers working toward Public Service Loan Forgiveness (PSLF) by keeping payments low and qualifying for forgiveness after 10 years of qualifying payments.
Pros of the SAVE Plan
- Lower payments than any other plan
- $0 payments are possible for low-income borrowers
- No interest growth
- Faster forgiveness for small loans
- More flexibility for married borrowers
Cons of the SAVE Plan
- Longer repayment time (up to 20-25 years) for borrowers enrolled in PAYE
- No cap on payments if your income rises
- Not available for Parent PLUS loans unless they are double-consolidated
- The forgiven amount may be taxable after 2025
- Legal delays may affect enrollment and benefits temporarily
❗ 2025 SAVE Plan Updates
In early 2025, the 8th U.S. Circuit Court of Appeals upheld a preliminary injunction against the SAVE plan, and the recently passed 2025 budget bill includes a timeline to fully rescind the plan. Borrowers can no longer apply for the SAVE plan. As of 2025:
- Borrowers enrolled in the SAVE plan have been placed on an Administrative Forbearance with no loan payments due
- This forbearance is interest-free, but does not qualify for any type of loan forgiveness
- Borrowers on the SAVE Forbearance have two options:
- Remain on the forbearance until SAVE is replaced by another IDR plan, or
- Apply to switch to another IDR plan early
Which Choice is Right For You?
How to move forward from SAVE depends on your priorities. If you are working towards loan forgiveness or if you are nearing the end of PSLF, you may want to consider switching into a different plan and resuming payments as soon as possible. On the other hand, if the budget is tight, you might want to stay on forbearance and take advantage of this time without making payments.
Frequently Asked Questions (FAQs)
Q: Can I still apply for SAVE in 2025?
A: No. SAVE has been repealed by theTrump Administration’s Big Beautiful Bill.
Q: What if I already have a REPAYE Plan?
A: You were automatically moved into the SAVE Plan in 2023. If you are still enrolled in SAVE, your loans are currently on an Administrative Forbearance.
Q: Will SAVE cancel my student loans?
A: Not right away. As written, SAVE reduces payments and leads to forgiveness after a period of 10 to 25 years.
Q: Do I need to consolidate to qualify?
A: Only if your loans are not Direct Loans (like FFEL or Perkins Loans).
Q: Is interest really canceled under SAVE?
A: Yes. Any unpaid interest is wiped out each month if your payment doesn’t cover it.
Final Thoughts: Is SAVE Right for You?
Due to recent developments, borrowers cannot apply for the SAVE Plan. At this point, it comes down to deciding whether to ride out the SAVE forbearance or proactively switch to an alternate repayment plan.
Even though the plan is on hold due to legal issues, the core benefits of Income-Driven Repayment and loan forgiveness are still in place.
What To Do Next
If you're unsure about your options, Docupop can help.
Docupop offers a free student loan review to help you:
- Consolidate non-qualifying loans
- Find the right repayment plan
- Apply for loan forgiveness
Start your free review with Docupop now → https://www.docupop.com
