The Future of Federal Student Loans

Nate Crosby |

The Future of Federal Student Loans

Student loan forgiveness and federal repayment plans have recently been a hot topic. With the amount of people impacted by student loans, I would expect this will continue to be a topic of interest for the US. With President Biden’s student loan forgiveness being dismissed by Congress, the U.S. Department of Education has created a new type of plan to replace the current REPAYE plan. The plan is called the Saving on Valuable Education or SAVE plan. Many are left asking what is the difference between the REPAYE and SAVE plan and how will it affect new and current borrowers?

While there are many facets to these two plans, some of the key differences are in payments, spousal income, and loan forgiveness timeline. 

Payment Cuts

The new SAVE plan would make payments on student loans less demanding by cutting the payment of a loan to $0. This will only be possible if the loan is for a single borrower earning less than $32,800 a year or a family of four (4) making less than $67,500 a year. By increasing the exemption level on student loan payments from 150% to 225%, the SAVE plan allows more borrowers to decrease their monthly payments.  

Excludes Spousal Income (only if filing taxes separately)

Unlike the current REPAYE plan, the SAVE plan will allow married couples to exclude one another’s income when filing taxes separately. This means your monthly payment will be based on the loan borrower’s income only. 

Loan Forgiveness after 20 Years

One of the biggest changes in the SAVE plan is that the Federal Government will forgive loans after 20 years of payments for undergraduate borrowers and 25 years for graduate borrowers. If a borrower has less than $12,000 and has been making payments for 10 years, the loan balance will be forgiven. 

For more information on the SAVE plan, visit the student aid website. Minimizing or eliminating your debt is a critical piece of any wealth management strategy. If you need help building a loan repayment strategy, please don’t hesitate to contact us


Disclaimer: Crosby Advisory Group, LLC provides financial planning, business growth strategies and Insurance protection. CAG is a registered investment advisor. Investing involves risk including the potential loss of principal. Consider all risks before investing.