How is the repayment calculated in SAVE plan?
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Abbey Johnson, Helping with Student Loan DocumentationAnswered on September 29,2023
Student loans have an annual interest rate, but accrue interest daily. When you make a payment, it goes to interest/fees first and then to the principal. The default payback plan (assuming you have done no consolidation) is the 10 year standard. You get a fixed payment that you will pay for 120 payments (10 years) and at the end your loans are paid off because it accounts for the interest that will accrue over that time. On under 10k in loans that payment would be around $90 a month. The faster you pay, the less interest you pay.
IDR plans (like SAVE) are not designed to pay your loans off—although they can. They are focused on giving you a payment based on your income and promise to forgive the balance that remains (if any balance remains) after 240 or 300 qualifying payments. These payments would ideally be lower than the 10 year standard so that there is a balance to forgive.
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Ultimate Guide on SAVE Plan - Payment Calculation, Interest, Forgiveness
Under the Saving on a Valuable Education (SAVE) plan, a single borrower who makes less than $15 an hour will not have to make any payments. Borrowers earning above that amount would save mor..Click here to get a detailed guide
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