September 29, 2023

By  John P. Morgan, Esq., LL.M., CPA-PFS, CFP®

As federal student loan borrowers are undoubtedly aware, on March 20, 2020, President Trump
suspended required student loan repayments, and temporarily reduced the interest rates on student loans
to 0% as part of emergency measures relating to the emerging Covid-19 pandemic. Now, some three and
a half years later, required student loan payments are set to resume in October 2023. While the
resumption of student loan payments is commonly known to borrowers, as is the U.S. Supreme Court’s
striking down of some student loan forgiveness in Biden v. Nebraska, many significant aspects of the
Biden administration’s overhaul to the federal student loan regime, specifically for borrowers enrolled in
the new Saving on A Valuable Education (SAVE) Plan, are not as widely known or understood. This
article seeks to educate readers on some of the most impactful, but lesser known, aspects of these

1. Reduced Payments. Monthly payments under SAVE are calculated based on a
borrower’s monthly disposable income, calculated for these purposes as the excess over 225% of the
poverty line. Some prior payment plans calculated monthly disposable income as the excess over 150%
of the poverty line. Borrowers who only have undergraduate debt will pay 5% of their monthly income
toward their student loans; they were previously required to pay 10% under other payment plans, such as
REPAYE. Debt from graduate programs is still subject to 10% of disposable income; borrowers with
both undergraduate and graduate student loan debt will have a weighted average between 5% and 10%.
Although this calculation can be complex, it will greatly reduce the monthly required student loan
payment for many borrowers. The Department of Education’s website gives a few specific examples of
this, stating that “a single borrower who makes less than about $15 an hour will not have to make any
payments, and borrowers earning above that amount would save more than $1,000 a year on their
payments compared to other IDR plans.”

2. Student Loan Interest. Of course, some borrowers with greatly reduced (or no) required
payments will not cover the interest running on their loans. Common are stories of borrowers with
student loan balances significantly higher than when the borrower graduated, even though the borrower
has faithfully been making payments for a number of years. According to the Department of Education
website, the SAVE Plan “ensures that borrowers never see their balance grow due to unpaid interest as
long as they keep up with their payments.” That is to say, if your monthly payment is insufficient to
cover the interest owed on your student loans in a given month, the government would cancel the excess
interest. The significance of this provision cannot be overstated for many borrowers.

3. Certification. Most borrowers need to “recertify” their income on an annual basis, by
supplying the government with information about the borrower’s income and tax returns. The SAVE Plan
affords some borrowers with the opportunity to have their income recertified automatically, without any
action on the borrower’s part.

Note that the SAVE Plan is just one of several payment options, and that certain aspects of the
SAVE Plan are beyond the scope of this article. Individual borrowers can explore whether the SAVE Plan
or another payment plan is best for them by using the government’s student loan simulator, found here:

John Morgan is Counsel at Rees Broome, PC, in Tysons Corner, Virginia. You may contact him
at or 703-790-1911.