In This Article
Are you interested in learning more about President Biden’s new SAVE plan for student loans? Tiffany Grant provides a detailed overview of the plan, including how payments are calculated, the potential benefits and drawbacks of the plan, and who best suits the plan.
Get all the information you need to know about the SAVE plan – like how it calculates loan repayments based on the borrower’s income and family size, not on the original loan amount – and find out if it’s right for you!
Don’t miss out on this chance to learn all about this important student loan policy proposal.
Every Tuesday, Tiffany answers one of your submitted questions. To submit a question for an upcoming episode, visit here: https://www.moneytalkwitht.com/asktiffany
Need help figuring out how to pay off your debt? Don’t hesitate to schedule a consultation with me to explore your options: https://academy.moneytalkwitht.com/15-minute-consultation.
Additional Links & Resources
Other Repayment Plans: https://studentaid.gov/manage-loans/repayment/plans
Connect With Tiffany
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LinkedIn: Tiffany Grant
Intro/Outro: You know what it is. That’s right. It’s time to talk money with your money nerd and financial coach. Now tighten those purse strings and open those ears. It’s the money talk with Tiff podcast.
Tiffany Grant: Hey, Hey, and welcome to another episode of Tiffany’s take where I answer your money questions right here on the podcast.
If you want your question answered, just go to www. moneytalkwitt. com forward slash x Tiffany and I’ll be more than happy to answer for you. So. Let’s just dive right in. Um, I kind of preface this on social media. Um, so if you follow me there, you kind of already know what this episode is going to be about, but I wanted to talk about the new save plan that president Biden has now implemented, and this is in regards to student loans.
And I’ve, I’ve been getting a few questions about what it is, why it matters. How is it going to help those types of things? So I wanted to answer all of those questions right here. Um, so let’s just go ahead and get started. So president Joe Biden’s new save plan, um, is specifically for student loans. Now save stands for.
Saving on a valuable education. It’s a new initiative and it’s similar to an income driven repayment plan. So it calculates loan payments based on the borrower’s income and family size, not your original loan amount. So if you’re familiar with student loans, you know, plans like the standard repayment plan.
They calculate based on what your total loan amount is, and then they give you how much you would need to pay every month to pay it off in 10 years. So that’s typically how the standard repayment plan works. But with this is actually based on your income, your discretionary income is that.
Okay, so you’re probably wondering, how are they calculating discretionary income? Do I have to submit my expenses and all that stuff? No, so what they’re doing is, they do have a beta application out now, so you can actually apply for this, um, repayment plan currently, and it would be a good idea to do so if you’re interested in it, because student loan repayments start very, very soon.
Interest starts accruing in September. Payments will restart in October, but what they’re doing is using 225% of the federal poverty level based on your family size and your state of residence to determine your discretionary income. So what does that mean? That means they’re looking at. what number is like poverty level, adding 225% to that.
And then they’re saying, okay, this is how much expenses you should have. And then anything over that is your discretionary income. And then they’re making your payment 10% of that. So hopefully that makes sense. And I didn’t confuse you, but I tried to explain it, um, in the best way I could. So that’s how they’re calculating your payments.
So when they announced this, you know, they said it promises to cut your payments on undergraduate loans in half compared to other income driven repayment plans, ensuring that you never see your balance grow. You know, it, it sounds good and we’ll have to just see it in practice. It can potentially reduce payments for millions of borrowers and more will qualify for 0 payments.
However, there may also be some downsides, like some people might have to pay higher payments or some other unintended consequences. With things like this, we’re just going to have to see what happens after they implement it. And then they can kind of start getting the kinks out. So according to vice president Harris, a typical borrower could save around a thousand dollars a year.
And if you do join this plan, if you do apply for this plan and get accepted, any outstanding balance on your loan will be forgiven if you haven’t repaid your loan in full after 20 years. If all loans were taken out for undergraduate study or 25 years, if any loans were taken out for graduate or professional study.
Now, who would this be good for? Um, because you might be saying, Ooh, 20 years. I don’t know if I want to like that long or 25 years. This is good for people that are. You know, going towards the public service loan forgiveness. So if you already are on that track, you already work somewhere where you’re qualified for that, then this would be a good plan to go under because your payments will be less.
And then with the PSLF. After 10 years, it’ll be forgiven anyway. And so you can kind of play it strategically. Um, if you are on that route, um, also you’ll usually pay more over time than under the 10 year plan with this plan. So keep that in mind and you may have to pay income tax on any amount that is forgiven.
So make sure you keep that in mind. And what does that mean? That means. Once they forgive your student loans, if you hit the 10 year for PSLF or the 20 or the 25 years, you know, under the plan, then you will have to pay income tax on whatever that amount is. And typically what they’ll do is they’ll send you a.
Tax form that you file with your taxes and then, um, you know, you kind of do it that way. So just keep that in mind. If you do get your student loans forgiven, you may have to pay income tax on that. So just make sure that you have enough to do that and you’re not… You know, being blindsided by a tax bill.
Now, also thinking about this plan, your payments are recalculated each year. So you have to keep applying each year. It’s not just going to carry over. Um, and they’re all based on your updated income and family size. You have to update your income and family size every year, even if they haven’t changed.
So like I said, Don’t just think, Oh, it’s just going to roll over. No, make sure you go into your student loan servicer site and you update that. If you’re married, your spouse’s income or loan debt will be considered only if you file a joint tax return. So if you’re married, married, filing separately, Then your spouse’s income will not count.
Now you could play this strategically, um, again, where, you know, you and your spouse decide, okay, let’s not file a joint tax return, but also keep in mind that when you marry file joint, um, There are certain tax benefits to that. So make sure you weigh both pros and cons. Okay, and I think that’s pretty much it You have to have a direct loan with the federal government and if you’re not sure what type of loan you have make sure you check with your student loan servicer and They can let you know or the website can let you know.
So I think that’s a So you a good overview of what this new payment plan entails, and if you want to learn more about it, I’ll make sure I put a link in the show notes to the federal government’s page so you can learn more about not just this plan, but any of the other plans that they have to see what’s the best fit for you.
Also, I highly recommend. Putting your information in if you have access to your servicers website, and they can actually tell you which ones you’re eligible for and which ones you should think about. So make sure you educate yourself on the different options that you have so that way you can make sure that you are maximizing your money to its fullest capabilities.
So thank you so much for listening to the money talkative podcast today. I so appreciate you all tuning in to me every week. Please be sure that you subscribe, you rate, you review, um, cause those definitely help. Get our message out to other people, and then also share with your family and friends because we want them to be educated as well.
So if you want your answer, your question answered on the podcast, go to www. moneytalkwitht. com forward slash X Tiffany, and I’ll be more than happy to answer. But until next time, I hope you have a wonderful rest of your week. Bye.
Intro/Outro: Thank you for listening, joining, and being a part of the Money Talk with Tiff podcast this week.
You can check Tiff out every Thursday for a new Money Talk podcast, but if you just can’t wait until next week, you can listen to previous podcast episodes at MoneyTalkWithT. com or follow Tiff on all social media platforms at MoneyTalkWithT. Until next time, spend wise by spending less than you make. A word to the money wise is always sufficient.
Tiffany Grant: Oh
Welcome to the latest installment of Money Talk With Tiff, where today, we’ll be diving into the nuts and bolts of President Biden’s Saving on a Valuable Education (SAVE) program. In a recent episode, host Tiffany Grant laid out the key features of this new initiative, unraveling its complexities and discussing its potential implications for student loan borrowers. So, if you’ve been wondering whether the SAVE plan could be a game-changer for you, read on!
How the SAVE Plan Works
As Tiffany explained, the SAVE program calculates loan repayments based not on the original loan amount, but on the borrower’s income and family size. This mechanism offers the potential for reduced monthly payments for millions of borrowers and could even qualify some for zero payments.
Vice President Harris has touted the typical borrower as being able to save around a thousand dollars a year under the SAVE initiative. While that sounds like a win-win situation, Tiffany also cautioned listeners about potential downsides, such as higher payments for some or other unintended consequences.
One major highlight of the SAVE plan is its forgiveness provision. As Tiffany noted, any remaining loan balance would be forgiven after 20 years for undergraduate loans or 25 years for graduate loans. The plan could be particularly attractive for beneficiaries of the public service loan forgiveness program.
Paying More Over Time and Tax Implications
While the SAVE plan may offer reduced monthly payments, it’s important to be aware that borrowers will still pay more over the loan’s lifetime compared to the standard 10-year plan. Additionally, the forgiven loan amount could be subject to income tax, so it’s essential to factor that into your calculations as well.
Another key point Tiffany mentioned is that the SAVE plan requires borrowers to reapply each year based on their income and family size. Remember that this isn’t a set-it-and-forget-it plan; borrowers need to be proactive in maintaining their eligibility.
Married Couples and Joint Filers
For married borrowers, Tiffany highlighted that only those who file joint tax returns will have their spouse’s income and loan debt considered under the SAVE plan. Couples filing separately should take note – you won’t automatically have your spouse’s financial situation factored in when determining your repayment.
Tiffany wrapped up the episode by urging listeners to learn more about the various repayment options available on the government’s student loans page. Knowledge is power, and an educated decision will ensure you’re making the best choice for your financial situation.
So there you have it – the inside scoop on the Biden Administration’s SAVE plan. If you’d like to learn more, be sure to check out the full episode of Money Talk With Tiff for an in-depth discussion!
And, as always, stay tuned for further insights and expert guidance to help you navigate the ever-changing world of personal finance. Happy listening, and good luck with your student loan journey!