(LOANS-23-07) Loan Servicing Information - Availability of Saving on a Valuable Education (SAVE) Plan and Updates to the Income-Driven Repayment Plans

Author
Federal Student Aid
Electronic Announcement ID
LOANS-23-07
Subject
Loan Servicing Information - Availability of Saving on a Valuable Education (SAVE) Plan and Updates to the Income-Driven Repayment Plans

We are pleased to announce modifications to the Income-Driven Repayment (IDR) plans for eligible William D. Ford Federal Direct Loan (Direct Loan) Program and Federal Family Education Loan (FFEL) Program borrowers. On July 10, 2023, the Department of Education (the Department) issued final regulations for the IDR plans and announced its intention to early implement some provisions as soon as possible (88 FR 43820). The provisions identified for early implementation will have the greatest impact to the existing REPAYE Plan. This means that eligible Direct Loan borrowers can benefit from the provisions early implemented in this final rule before payments resume. We understand that borrowers will contact members of the financial aid community with questions about the IDR plans and particularly the SAVE Plan. We hope you find the following information helpful.

REPAYE Plan Is Now the SAVE Plan

The modifications to the REPAYE Plan are so significant that the Department determined that the plan needed a new identity. The Revised Pay As You Earn (REPAYE) Plan is being renamed the Saving on a Valuable Education (SAVE) Plan. References on StudentAid.gov and other Department publications are being revised to reflect the transition to this new name. Until the revisions are complete, all mentions of the REPAYE Plan can be understood to mean the SAVE Plan. Starting with the upcoming academic year, schools should also begin updating their own publications and references to inform their students that SAVE is the new name for REPAYE.

What is New in the SAVE Plan Immediately?

The greatest benefit for borrowers on the SAVE Plan is the way discretionary income is determined when calculating the borrower’s monthly payment. The SAVE plan uses 225% of the Federal Poverty Level (FPL) based on family size and state of residence to determine a borrower’s discretionary income. This is a significant increase over the 150% that was used under the previous REPAYE plan. This means that a single borrower with no dependents will have a $0 payment if their adjusted gross income (AGI) is below $32,805 or will otherwise have $32,805 subtracted from their AGI to determine their discretionary income. Likewise, a married borrower filing a joint federal tax return with no dependents will have a $0 payment if their AGI is below $44,370 or will otherwise have $44,370 subtracted from their AGI to determine their discretionary income. The SAVE Plan continues to keep a borrower’s monthly student loan payments affordable by capping the payment amount at 10% of the borrower’s discretionary income.

The SAVE Plan aligns the inclusion of spousal income with other existing IDR plans. Borrowers who file their federal tax return as married filing separate will only include the income of the borrower when determining their monthly payment.

The SAVE Plan also improves the interest benefit provided to borrowers in repayment. If a borrower’s monthly payment does not exceed the amount of interest that accrued for the month, the additional interest is not charged to the borrower, regardless of the loan type and for the entirety of the repayment period. In the previous REPAYE Plan, the full benefit was only available for subsidized loans during the first three years in repayment and half the benefit for the remaining repayment period and unsubsidized loans only received half the benefit for the entirety of the repayment period. This means that borrowers on the SAVE Plan that make their monthly payment as scheduled will not see their loan balance grow over time simply because their payment is less than the interest accruing.

Additional benefits to the SAVE Plan that are not being implemented early will be effective July 1, 2024.

Who is Eligible for the SAVE Plan?

Borrowers who are currently enrolled in the existing REPAYE Plan will not need to take any action; they will have their monthly payment recalculated based on the AGI and family size provided when they last certified their income using the new discretionary income calculation.

There is no income requirement to qualify for the SAVE Plan, and the plan is available to all Direct Loan borrowers with eligible loan types, regardless of when they took out their loans.

All Direct Loans may be repaid under the SAVE Plan, except for Direct PLUS Loans for parents and Direct Consolidation Loans that repaid PLUS loans for parents.

NSLDS Updates Related to the SAVE Plan

Our federal loan servicers will continue reporting the code “I5” to the National Student Loan Data System (NSLDS) when a borrower is repaying a Direct Loan under the SAVE Plan. School users will see the code when they access the Loan Detail Page on the NSLDS Professional Access Web site. The repayment plan name associated with this code may continue to display as REPAYE in NSLDS and NSLDS generated reports but should be understood to mean SAVE until the NSLDS systems are updated with the new name.

How Does This Affect All IDR Plans?

Many of the provisions being implemented early are specific to the SAVE Plan, however, there are some provisions that are being implemented along with these changes that will affect all IDR plans.

Consent to Use Federal Tax Information

As part of the FUTURE ACT, borrowers paying under an IDR plan will be able to consent to the use of their federal tax information to calculate their income and family size for the purpose of determining their monthly payment. Borrowers who consent to this disclosure when using the updated Online IDR Plan Request will authorize the use of this information for as long as they remain in an IDR plan. This allows the annual recertification of a borrower’s IDR plan to occur automatically. This is a benefit for borrowers who had previously needed to reapply manually every year to provide this information, which would often lead to loss of eligibility to remain in the IDR program because the information was not received in a timely manner. Borrowers will still have the opportunity to provide their income information directly to their servicer if they believe their most recent tax information is not correctly reflecting their current income or family size.

Important: the authorization to use federal tax information that is provided for use in the FAFSA is not the same as the authorization provided for IDR; they are not interchangeable. A borrower’s consent to use tax information on the FAFSA is only valid for the year associated with the FAFSA and needs to be provided each year. Consent provided for IDR remains in place as long as the loan is in repayment, unless the borrower revokes consent by logging in at StudentAid.gov and changing the consent status in “Financial Information Access” under settings.

Additionally, as a result of this new interface with the Internal Revenue Service (IRS) to authorize the use of federal tax information, the former Data Retrieval Tool (DRT) will be retired.

Because the federal tax information received through borrower consent would include family size information based on tax filing status to calculate their monthly payment, borrowers who file their taxes as married filing separately will not have their spouse included in their family size. Since this could affect their monthly payment calculation, they will be given a choice during this transitionary year to instead have their payment calculated by their servicer, which allows them to include their spouse in their family size. They will be presented with this choice when they use the updated Online IDR Plan Request.

Changes to Interest Capitalization

As part of the final rule issued on November 1, 2022 (87 FR 65904), interest will no longer capitalize when a borrower leaves an IDR plan (other than the IBR Plan), when it is determined the borrower no longer has a partial financial hardship in the PAYE plan, or when there is negative amortization in the PAYE or ICR plans.

Loan Simulator

We have updated the Loan Simulator to reflect these new IDR changes. This update includes the early implemented changes to the SAVE Plan, which enable borrowers to compare their monthly payment amount under the repayment plans available to them based on their actual loan types and balances.

Online Income-Driven Repayment (IDR) Plan Request

To help borrowers apply for the SAVE Plan, as well as the three other IDR plans—the Pay As You Earn (PAYE) Repayment Plan, the Income-Based Repayment (IBR) Plan, and the Income-Contingent Repayment (ICR) Plan—we have updated the Online IDR Plan Request.

The updated Online IDR Plan Request continues to interface with NSLDS to gather the personalized loan information for the borrower and, with the borrower’s consent, to interface with the IRS to obtain the federal tax information. This will streamline the application process for the majority of borrowers who choose to repay their eligible Direct Loans under SAVE, PAYE, IBR, and/or ICR plans and, when consent is provided, eliminate the need to reapply every year.

Borrowers with FFEL Program loans will continue to use the updated Online IDR Plan Request, but they will not be able to provide the consent necessary to use IRS tax information and will be asked to provide income documentation to their servicer.

A borrower will use the updated Online IDR Plan Request to complete the following actions that will ultimately be shared with the borrower’s servicer:

  • Initially apply to participate in an IDR plan and provide consent if they are a Direct Loan borrower.

  • Recertify their participation in an IDR plan if consent has not previously been provided.

  • Request the recalculation of their monthly payment amount due to a change in circumstances.

  • Switch from one IDR plan to another.

For the first six months following return to repayment, the updated Online IDR Plan Request will also permit borrowers to self-certify their income and family size.

Communication Plan

We will launch a communications campaign to introduce the SAVE Plan to borrowers as they reenter repayment following the payment pause. Messaging will be tailored to borrowers who can benefit from the SAVE plan, including borrowers who entered repayment while payments have been paused. We hope this outreach campaign will result in increased awareness of this new repayment plan, but we know that it may also generate many questions from borrowers

More Information

Complete information about the SAVE Plan is available on the SAVE PLAN Announcement page of the StudentAid.gov Web site. This information includes a detailed explanation of the new features of the SAVE Plan and an overview of what’s to come.

We understand that borrowers will contact members of the financial aid community with questions about the IDR plans and particularly the SAVE Plan. We hope you find the attached information helpful in answering their questions and appreciate the assistance you will provide in directing borrowers as follows:

SAVE, PAYE, IBR, and ICR Plan Information

A borrower’s servicer is the primary point of contact for all questions about the SAVE, PAYE, IBR, and ICR plans. Information about the plans is available online at:

This return to repayment checklist for borrowers highlights key information about how borrowers can prepare for student loan payments to begin again, including by enrolling in the new SAVE plan.

Last Modified: 09/14/2023