The Crafty “SAVE” Plan That Will Forgive Student Loans Anyway

Few things are as polarizing as student loan debt forgiveness. Without picking sides or trying to sway anyone in either direction, I just want to point something out. Student loans WILL be forgiven for many bowers under the SAVE Plan released by the Biden Administration recently. The basis of the plan is that the old threshold of making monthly payments equal to a maximum limit of 10% of discretionary income (under REPAYE) has been dropped to 5% of discretionary income. However, that calculation used to determine where your discretionary income starts is now based ONLY on income ABOVE 225% of the poverty line. Under REPAYE this figure was 150%.

What does that mean in plain English? For a family of four, a household income of just under $68,000 will not owe monthly federal student loan payments under the new SAVE plan. For anyone that is single, this threshold is a tad under $33,000. After ten years, if your initial balance was under $12,000, your student loans will be forgiven in their entirety. For every thousand dollars above $12,000 that your initial balance was, you can add one year to that timeframe, with a maximum forgiveness length of twenty-five years.

At the end of the day, loans aren’t simply forgiven across the board based on income, but payments are effectively ended based on those who qualify off their income. This forgiveness plan may not work if your income is expected to increase throughout the next decade, but for someone who is a teacher, for instance, there is a great chance you will receive full forgiveness.

Bottom line: If you owe me money and never pay me for ten years, and then I forgive your debt… what’s the difference? Will there be a legal challenge here on this plan? That is to be determined.