How do income driven repayment plans actually work? Is SAVE worth it?

Personal Finance

Just graduated with k in loans and my first job pays k in Atlanta. The standard 10 year payment would be like /month which is rough when Im also paying ,400 rent. I keep hearing about the SAVE plan and income driven repayment. Can someone explain how this works? Does it actually help or am I just paying longer and more interest in the end?

Ashley Davis

3 Answers

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SAVE plan is actually really good, especially for your situation. Heres the basics:

Payment is 10% of your discretionary income (income minus 225% of poverty line)

At k income your payment would probably be around -250/month instead of

Government covers unpaid interest so your balance doesnt grow

Remaining balance forgiven after 20 years (10 years for balances under k)

The downside is yes you pay longer, but if your income stays modest the total paid might actually be less. Use the studentaid.gov loan simulator to run the numbers for your specific situation. For me SAVE cut my payment almost in half.

Justin Garcia

SAVE is great right now. My payment dropped from to . And the interest subsidy means my balance isnt growing anymore. Way better than the old IBR and PAYE plans.

Brittany Thomas

One thing to know - if your income goes up significantly later, your payments go up too. But for now while youre starting out, IDR plans are a lifesaver. You can always pay extra if you have it.