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The Department of Education’s recent guidance on the SAVE Plan has left many borrowers wondering, Should I stay in SAVE or switch to another repayment plan?
This post will dive into the pros and cons of sticking with the SAVE Plan or transitioning to PAYE, IBR, or ICR. As always, before making changes to your repayment plan, I highly recommend consulting with a Certified Student Loan Professional who can tailor advice to your personal situation.
But first, make sure to subscribe to the K-12 Planning weekly newsletter so that you never miss a student loan update!
Why This Matters Now - SAVE Plan Updates
Last week, I wrote a blog summarizing the Department of Education’s SAVE guidance released on January 15, 2024. The response was incredible, and I’ve spent the past week answering questions from borrowers during consultations.
One of the most common questions? Should I stay in SAVE and wait it out, or switch to another repayment plan to ensure my payments count toward forgiveness?
Let’s break it down.
Should I Stay in SAVE?
For some borrowers, staying in the SAVE Plan might be the best choice. Here are a few scenarios where staying makes sense:
Case 1: You’re Not Pursuing PSLF
If you’re not working toward Public Service Loan Forgiveness (PSLF), staying in SAVE could be your best bet. Here’s why:
Your loans are in administrative forbearance, which means you’re not required to make payments.
No interest is accruing.
Life continues to feel much like it has since March 2020 when federal student loan payments were paused.
If you don’t need PSLF credit, staying in SAVE offers simplicity and relief, at least for now.
Case 2: Your Income Has Significantly Increased
This is a situation I’m seeing frequently. If your repayment amount is still based on outdated tax information, like 2019 income, and your income has since skyrocketed, staying in SAVE might be your best option.
Here’s why:
By changing repayment plans, you are forcing an income recertification. Your new repayment amount will be based on 2023 tax data rather than 2019 tax data.
Other repayment plans, like PAYE or IBR, require you to prove a partial financial hardship to qualify. If your current income disqualifies you, you may not have access to these plans.
SAVE (formerly REPAYE) doesn’t require a partial financial hardship to remain enrolled, and you likely won’t have to recertify your income for months (or even years).
Case 3: You Believe the PSLF Buyback Program Will Stick Around
The PSLF Buyback Program allows borrowers to “buy back” time spent in ineligible forbearance or deferment. If you believe this program will continue, staying in SAVE might make sense.
Here’s how it works:
You could buy back those ineligible months at your current repayment amount, potentially speeding up your path to forgiveness.
However, the program’s long-term sustainability is unclear. There’s no guarantee it will be available in the future.
If you’re optimistic about the program’s longevity, staying in SAVE may be a reasonable choice.
Should I Go?
In some cases, switching to another repayment plan like PAYE, IBR, or ICR might be the better move.
Case 4: You’re Close to PSLF or IDR Forgiveness
If you’re nearing the 120 payments required for PSLF or the 20-25 years required for IDR forgiveness, switching repayment plans could be the safer choice.
Here’s why:
Payments made under PAYE, IBR, or ICR continue to count toward PSLF credit (must be on IBR for long-term forgiveness).
SAVE’s uncertain future and the unknowns around the PSLF Buyback Program make it more risky to wait too long.
Case 5: Your Income Matches Your Income at Your Current Repayment Amount
If your income hasn’t changed significantly since your last recertification, switching to PAYE or IBR might work well for you.
Key points to consider:
To qualify for PAYE, you must not have been a borrower before Oct. 1, 2007 and you must have taken out loans after Oct. 1, 2011.
If the Buyback amount would be the same as your current repayment under PAYE or IBR, then it doesn’t make sense to hope that the Buyback will be there for you when you could have guaranteed credit for months of payments.
Case 6: The Known is Better than the Unknown
When deciding whether to stay in SAVE or switch repayment plans, it’s important to weigh the stability of the options available.
Plans like PAYE, IBR, and ICR are currently open and available, provided you meet the eligibility requirements. These plans have been around for years and offer a level of predictability and consistency.
On the other hand, the future of the SAVE Plan remains uncertain. With ongoing litigation and program changes, relying on SAVE could mean missing out on certain benefits.
For borrowers who prefer stability and a clearer path forward, switching to a plan with fewer unknowns, like PAYE or IBR, may be the safer bet.
Important Note
Switching repayment plans can trigger interest capitalization, where unpaid interest gets added to your loan principal.
For borrowers pursuing PSLF, capitalization isn’t a major concern since the remaining balance will eventually be forgiven.
However, if you decide to stop pursuing PSLF in the future, this will increase your total repayment cost.
This is an important consideration when deciding whether to stay in SAVE or switch.
Things to Remember
1. Flexibility Is Key
Student loan rules can change at any time. A decision that works today might not make sense six months from now. Staying informed is critical.
2. PSLF Processing Is Ongoing
Even if you’re in SAVE, the PSLF program is still processing applications. If you meet the requirements, this is a reliable path to forgiveness.
3. Speak to Someone Who Understands Student Loans
Student loans are complex, and every borrower’s situation is unique. Consulting with a professional ensures you’re making the best decision for your financial future.
Final Thoughts
Deciding whether to stay in SAVE or switch repayment plans isn’t a one-size-fits-all decision. It depends on your income, your goals, and your timeline until forgiveness.
What’s clear, though, is the importance of staying up-to-date. Student loan rules and programs are constantly evolving, and having the right information can save you thousands of dollars and years of unnecessary payments.
Have questions about your student loans? Let’s chat! Schedule a consultation today.
David Gourley, CSLP® is the Founder and lead Financial Planner at K-12 Planning, an independent financial planning firm specializing in finance for teachers. He served for eight years as a high school mathematics teacher before transitioning into the financial services industry. He started K-12 Planning in 2024 and his passion for serving as a fiduciary for teachers and a student loan planning expert runs deep, as his wife and several other family members have served as educators for years.
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