Student loans: Let’s talk about SAVE
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Key takeaways:
- SAVE allows borrowers with high-earning spouses to exclude their spouse’s income as long as one files “married filing separately.”
- Monthly payment is based on income and family size.
The Savings on a Valuable Education (SAVE) plan was introduced in 2023 by the Biden Administration and replaces the Revised Pay As You Earn (REPAYE) program. SAVE continues to evolve with new benefits for student loan borrowers.
SAVE is an income-driven repayment (IDR) plan that may result in lower monthly payments for borrowers because the payments are based on a smaller proportion of one’s adjusted gross income compared with other IDR plans. For example, if you are single with an annual income of $32,800, or if you have a family of four with an income of $67,500 or less, your monthly payment is $0.
How SAVE works
The monthly payment is based on income and family size. SAVE allows borrowers with high-earning spouses to exclude their spouse’s income as long as they file as “married filing separately.” In the former REPAYE program, a spouse’s income was included as part of your total income, regardless of tax-filing status.
SAVE also prevents interest accumulation for both subsidized and unsubsidized loans as long as monthly payments are made. For example, if $100 of interest accumulates each month and you have a $60 payment, then the $40 difference would not be charged.
Which plan to use?
Should you use SAVE or a different federal loan repayment plan? In the end, every situation and stage of career is individual. The official Federal Student Aid website has a loan calculator to help you figure out what works best for you.
Of note, unless you expect to work at a 501(c)(3) for 10 years after medical school and plan to apply for Physician Service Loan Forgiveness (PSLF), our personal recommendation is to live like a resident for 3 to 5 years once you are an attending and aggressively pay off your student loans. It feels great to finally reach a net worth of $0.
Reference:
Federal Student Aid. Calculate your federal student loan repayment options with Loan Simulator. Available at: https://studentaid.gov/loan-simulator/.
For more information:
Chirag P. Shah, MD, MPH, is a soccer and Nordic ski coach, who also practices medicine and teaches in Boston. He can be reached at cshah@post.harvard.edu.
Jayanth Sridhar, MD, is an award-winning podcaster, physician and educator who is chief of ophthalmology at Olive View Medical Center in Los Angeles. He can be reached at jsridhar119@gmail.com.
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