New SAVE student loan repayment plan could save borrowers $1,000 a year

The three-and-a-half-year pause on federal student loan payments ends this week on August 31. Interest will start accruing again, and payments will be due in October.

Twenty million student loan borrowers can now apply for a new repayment plan that is expected to save the average borrower $1,000 a year.

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President Joe Biden announced the Saving on a Valuable Education, or SAVE plan, after the Supreme Court blocked his loan forgiveness plan in June.

The SAVE plan will calculate a borrower's monthly payments based on income and family size.

It's estimated that more than one million borrowers will qualify for monthly payments of zero, based on their incomes.

As long as borrowers make monthly payments, interest will not accumulate, unlike it did in the past.  

The SAVE formula increases the amount of your income that is protected, and payments are based on the amount left, your discretionary income, and are therefore expected to be lower.

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Student loan expert Jason DiLorenzo with BenElevate breaks it down.  

"The SAVE plan has a 20 or 25-year forgiveness trajectory, depending on when you took out your loans," explained DiLorenzo.    

"Single borrowers who are earning any less than $30,000 a year still aren't going to have a payment, even coming out of Cares.  The discretionary formula doesn’t start until above $30,000 for single folks. For families, for example, a household of three, payments are zero with any household income below $60,000 dollars a year," he said.

Married couples filing separately will also have their spouse excluded from their family size in the calculation, which can help lower monthly payments.

With SAVE, borrowers who had original balances of $12,000 or less will receive forgiveness after 120 payments, or ten years.

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Borrowers will need to make 12 additional payments for each $1,000 borrowed, capping forgiveness at 20 or 25 years.

Borrowers can learn more about SAVE and other repayment plans on

For borrowers with loans that are already in default, President Biden is offering a new program called Fresh Start.

Once enrolled, it makes the loan current again, wipes the default off the borrower's credit report, and allows them to enroll in an income-driven repayment plan, which could lower the payment.

The Biden Administration says 3% of defaults are already in the program, and they expect it to help 7.5 million borrowers, many of whom are first-generation college students.

"All borrowers in default will have a full year to figure out if you're not in the right repayment plan.  If you're not working or you have a limited amount of income, you can enroll in SAVE and that will keep you with as little as a zero payment in compliance with your repayment plan, even though you have a zero payment," explained DiLorenzo.

President Biden has also established a one-year on-ramp to repayments.  It's a one-year grace period where a missed payment will not be reported on your credit report.  

Borrowers in default have one year from the end of the payment pause to enroll in the Fresh Start program.  They can learn more by visiting or call 1-800-621-3115.