Understanding Student Loan Repayment Plans
Federal student loans offer several repayment plans. The Standard plan spreads payments evenly over 10 years with the lowest total cost. The Extended plan stretches to 25 years for lower monthly payments but more interest. Income-driven plans like SAVE base payments on your income and family size, with forgiveness after 20-25 years.
The SAVE Plan
The SAVE (Saving on a Valuable Education) plan replaced REPAYE and is the most generous income-driven plan. Payments are 10% of discretionary income (income above 225% of the federal poverty level). Unpaid interest does not capitalize, and undergraduate borrowers may qualify for forgiveness after 20 years.
Frequently Asked Questions
Which repayment plan saves the most money overall?â–¾
The Standard 10-year plan typically results in the least total interest because you pay off the loan fastest. However, if you qualify for PSLF or expect significant loan forgiveness, an income-driven plan could save more overall despite higher total interest accrued.
How is discretionary income calculated for SAVE?â–¾
Under SAVE, discretionary income is your adjusted gross income (AGI) minus 225% of the federal poverty guideline for your family size. For a single borrower in the continental US, that means AGI minus approximately $33,885 (225% of $15,060). Payments are 10% of this amount, divided by 12.
Can I switch repayment plans after I start?â–¾
Yes. You can change federal student loan repayment plans at any time by contacting your loan servicer. There is no fee to switch. If you move from an income-driven plan to Standard, any unpaid interest may capitalize (be added to your principal balance).
Are forgiven student loan amounts taxable?â–¾
Under current law, student loan forgiveness through income-driven repayment plans is not treated as taxable income through 2025 (per the American Rescue Plan Act). After 2025, forgiven amounts may be taxable unless Congress extends this provision. PSLF forgiveness is always tax-free.
Calclypso Editorial Team
Reviewed by certified financial professionals. Last updated: April 2026. Student loan calculations use federal formulas. SAVE plan details are subject to regulatory changes. Consult studentaid.gov for the latest information.