In case your kids (or you) are repaying federal loans, the application for the new SAVE repayment plan is available. It might not work all the time right now, so keep checking if it’s glitchy - you’ll get a confirmation email once it’s successfully submitted. Choosing the option to have the IRS send borrower information directly to the loan servicer will allow the plan to be automatically recertified annually. Federal Student Aid.
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Is the SAVE plan legitimate, not just another ongoing possibility like the Loan Forgiveness plan that never happened?
I have two who won’t have issues restarting payments, but one who would have financial difficulties and would qualify for this with $0 payment.
Am I correct that interest would not accumulate on the original balance? And any loan balance would be forgiven after 20 years?
To the extent that anything done by the federal government is legitimate, the plan is legitimate.
Interest accumulation: “ The Department will stop charging any monthly interest not covered by the borrower’s payment on the SAVE plan. As a result, borrowers who pay what they owe on this plan will no longer see their loans grow due to unpaid interest. We estimate that 70 percent of borrowers who were on IDR plan before the payment pause would stand to benefit from this change.”
Loan balance: “Borrowers whose original principal balances were $12,000 or less will receive forgiveness after 120 payments (the equivalent of 10 years in repayment) with an additional 12 payments added for each $1,000 borrowed above that level, up to a maximum of 20 or 25 years.”
At this time, any amount forgiven is taxable in the year in which it is forgiven. With Public Service Loan Forgiveness, the amount forgiven is not taxed.
Thank you for the response. If you, or anyone really, can check the below for anything that I have wrong, I would appreciate it. As the repayments are starting soon, I want to verify my information before I discuss this with her.
With the full federal loans of $27,000, that would have put her at the 25 years mark before she would have had loan forgiveness?
She has managed to get the original balance down to $17000. (She used money she was awarded from a severe dog bite to pay off the loans with the highest interest rates.)
Which in turn takes me to this section on the studentaid.gov website:
" Payments made previously (before 2024) and those made going forward will both count toward these maximum forgiveness timeframes. "
As a single mom, she is way below the income levels for any payments required on this plan. From the above section, I take this to mean she would get credit for the $10000 already paid?
And that in turn would result in loan forgiveness of any unpaid balance after 15 years?
Thank you,
My understanding is that all previous payments will count, so she will get credit for any months (including the payment pause) that she was in repayment. If she was in school at all when she made voluntary payments, those won’t count toward in the “year” count (in school deferment payments don’t count). They say years, but it’s really months (20 years is actually 240 months). When did she begin repayment?
Thank for your response.
She started repayment in Jan of 2019 (6 months after graduating). The payments were erratic at the time. Sometimes extra, sometimes short. She is down to a balance of $16,500 from the original $20,500 she borrowed.
She also paid off a Perkins Loan over this time period. ( I think it was $2500.)
From what I read, payments she made when they went into Forbearance can be refunded. That means, In her case, she could apply for the $2800 she paid at that time?
She will definitely qualify for $0 payment.
So on the SAVE plan, if she starts now, with her current balance, how do we determine the time frame before they are forgiven? I assume the erratic payments that first year impact the years it will take?
Thanks again,
See the heading “Refunds During the Payment Pause” at this link: Federal Student Aid. She will have to contact her loan servicer.
Only her loan servicer will be able to tell her when the loans will be forgiven.
She is planning to call them about the refund, so I will make sure she asks about the time frame as well.
It’s just that, from personal experience, you don’t always get the correct information. So I was hoping there was some way to do it yourself, and verify the information that was given.
Thanks again.
Unfortunately, there is no simple answer. Undergrad and grad loans are forgiven on different timelines, loans that went into repayment but subsequent loans were later borrowed will be forgiven at different points in time, and there may be other factors.
It sounds like she should be able to get the $2800 refunded.
The time left to forgiveness will eventually be provided to her. If she only began repaying in 2019, there are many years to go - she will know the timeframe long before forgiveness kicks in.
This addresses previous payments and adjustments to count some that previously weren’t counted toward forgiveness: Federal Student Aid.