PAYE vs SAVE: A Guide to Choosing the Best Student Loan Repayment Plan

Introduction: The High Stakes of Student Loan Repayment Choices

For millions of borrowers, student loans aren’t just a financial burden—they’re a long-term puzzle requiring careful navigation. With repayment options like PAYE (Pay As You Earn) and SAVE (Saving on a Valuable Education), the goal is not only to reduce monthly payments but also to maximize forgiveness opportunities and avoid costly missteps. The challenge lies in choosing a repayment plan that aligns with your financial goals while also protecting against policy shifts that could alter the rules mid-game.

The decision between PAYE vs SAVE is one of the most critical for borrowers. PAYE offers a 20-year forgiveness timeline and payment calculations based on 150% of the federal poverty line, while SAVE boasts higher poverty thresholds, eliminating accrued interest, and expanded forgiveness options. However, switching plans isn’t always straightforward. For borrowers with significant progress toward forgiveness under PAYE, moving to SAVE could extend the timeline to 25 years—a decision that could add up to tens or even hundreds of thousands of dollars in additional payments.

But repayment isn’t just about the plan itself but the strategy. From accurately forecasting your Adjusted Gross Income (AGI) to leveraging tax filing statuses and retirement contributions to reduce payments, crafting the right approach requires detailed calculations, assumptions about future income, and a clear understanding of evolving student loan policies.

In this blog, we’ll break down the key differences between PAYE vs SAVE, explore the long-term implications of switching plans, and touch on other options like IBR (Income-Based Repayment), REPAYE (Revised Pay As You Earn), and ICR (Income-Contingent Repayment). By the end, you’ll have the insights needed to choose the most affordable monthly payment and a repayment strategy designed to eliminate your student loan debt efficiently and effectively.

When navigating student loan repayment, understanding the nuances of each plan is crucial. Both PAYE (Pay As You Earn) and SAVE (Saving on a Valuable Education) aim to make monthly payments more manageable while offering a path to loan forgiveness. However, they differ significantly in structure, eligibility, and long-term impact, What Are PAYE and SAVE Plans?

When it comes to student loan repayment, understanding the nuances of each plan is critical. Both PAYE (Pay As You Earn) and SAVE (Saving on a Valuable Education) aim to make monthly payments more manageable while offering a path to loan forgiveness. However, the plans differ significantly in their structure, eligibility, and long-term impact, which can profoundly affect your financial future.

PAYE Plan: Flexible Repayment with a Shorter Forgiveness Timeline

The Pay As You Earn (PAYE) plan was introduced to help borrowers reduce their monthly payments based on income, capping the repayment period at 20 years.

Eligibility:
To qualify for PAYE, borrowers must meet specific criteria:

• Partial Financial Hardship: Monthly payments under PAYE must be less than what you’d pay under a standard 10-year repayment plan.
• Loan Timing: Borrowers must not have had a federal loan balance before October 1, 2007, and must have received a loan disbursement on or after October 1, 2011.
• Eligible Loans: Only Direct Loans qualify. Other federal loans (e.g., FFEL, Perkins) can be eligible if consolidated into a Direct Consolidation Loan.

Benefits of PAYE:

• Capped Payments: Monthly payments are limited to 10% of discretionary income, defined as the difference between your AGI and 150% of the federal poverty guideline for your family size.
• Forgiveness Timeline: Loans are forgiven after 20 years of qualified payments, regardless of whether they were for undergraduate or graduate studies.
• Interest Subsidy: For subsidized loans, the government pays any unpaid interest for the first three years if your monthly payments are insufficient to cover it.

SAVE Plan: Designed for Higher Income Thresholds and Interest Relief

The Saving on a Valuable Education (SAVE) plan, which replaces REPAYE, is designed to expand benefits for borrowers, particularly those struggling with interest accrual.

Eligibility:
SAVE is available to all Direct Loan borrowers, with no requirement to demonstrate a partial financial hardship.

Benefits of SAVE:

• Higher Poverty Thresholds: Payments are based on the difference between your AGI and 225% of the federal poverty guideline—a significant increase compared to PAYE’s 150%. For a family of three, this threshold is $58,095, compared to PAYE’s $38,730.
• Lower Payment Caps: Payments are capped at 10% of discretionary income for graduate loans and 5% for undergraduate loans.
• Elimination of Interest Accrual: Any unpaid interest is eliminated monthly, ensuring your loan balance does not grow even if payments are insufficient to cover the interest.
• Forgiveness Timeline: Loans are forgiven after 20 years for undergraduate loans and 25 years for graduate loans.

Which Is Better?

Choosing between PAYE and SAVE depends on your unique circumstances:

• Borrowers with significant progress toward PAYE’s 20-year forgiveness timeline might prefer to stay the course. Payments already made under PAYE will transfer to SAVE if you switch, but once on SAVE, borrowers will no longer be eligible to return to PAYE after July 1, 2024.
• Conversely, borrowers with minimal progress, high-interest loans, or undergraduate-only debt could benefit from SAVE’s higher poverty threshold and interest elimination.

Both plans are tools for crafting a comprehensive repayment strategy. PAYE’s shorter forgiveness timeline makes it ideal for borrowers nearing forgiveness, while SAVE’s interest relief and lower payment caps offer long-term affordability for those early in repayment

By evaluating each plan’s benefits and potential trade-offs, you can identify the repayment strategy that aligns with your goals. Utilizing resources like the Loan Simulator on the Federal Student Aid website can assist in making an informed decision.

Key Differences Between PAYE and SAVE

Choosing between PAYE (Pay As You Earn) and SAVE (Saving on a Valuable Education) requires a clear understanding of how each repayment plan works. While both plans fall under the umbrella of income-driven repayment (IDR) plans, they differ significantly in how payments are calculated, eligibility requirements, forgiveness timelines, and their impact on forgiveness programs like Public Service Loan Forgiveness (PSLF).

1. Payment Calculation Methods

PAYE:

• Payments are capped at 10% of discretionary income, defined as the difference between your Adjusted Gross Income (AGI) and 150% of the federal poverty guideline for your family size.
• Example: For a Florida resident with a family size of three and an AGI of $100,000, the discretionary income is calculated as:
  • $100,000 – (150% × $25,820) = $100,000 – $38,730 = $61,270
  • Monthly Payment = ($61,270 × 10%) ÷ 12 = $510.58

SAVE:

• Payments are based on 225% of the federal poverty guideline.
• For graduate loans, payments are capped at 10% of discretionary income, while undergraduate loans are capped at 5%.
• Example: Using the same Florida resident example:
  • $100,000 – (225% × $25,820) = $100,000 – $58,095 = $41,905
  • Monthly Payment (Graduate Loans) = ($41,905 × 10%) ÷ 12 = $349.21

Takeaway: SAVE offers significantly lower monthly payments due to its higher poverty threshold, especially for borrowers with higher AGIs or larger families.

2. Eligibility Requirements and Income Limits

PAYE:

• Requires partial financial hardship, meaning monthly payments under PAYE must be lower than those under a standard 10-year repayment plan.
• Eligibility is limited to borrowers who took out their first loans after October 1, 2007, with disbursements after October 1, 2011.
• Only Direct Loans or loans consolidated into a Direct Consolidation Loan qualify.

SAVE:

• No financial hardship requirement.
• Open to all borrowers with eligible Direct Loans, regardless of loan disbursement dates.

Takeaway: SAVE is more accessible for most borrowers, while PAYE has stricter eligibility requirements.

3. Forgiveness Timelines

PAYE:

• Loans are forgiven after 20 years for both undergraduate and graduate loans.

SAVE:

• Undergraduate loans are forgiven after 20 years, but graduate loans require 25 years of payments before forgiveness.

Takeaway: Borrowers with graduate loans should carefully weigh the longer forgiveness timeline under SAVE, especially if they are nearing the 20-year mark under PAYE.

4. Impact on Public Service Loan Forgiveness (PSLF)

PAYE and SAVE qualify for PSLF, which forgives federal loans after 120 payments made while working full-time for a qualifying employer.

• PAYE: Higher payments may reduce the amount forgiven under PSLF since more of the principal is paid off during the 120-payment period.
• SAVE: Lower payments maximize the amount forgiven by reducing the principal paid during the PSLF period.

Takeaway: PSLF borrowers generally benefit more from SAVE due to its lower monthly payments, which maximize the forgiven balance.

5. Interest Accrual and Capitalization

PAYE:

• Subsidized loans receive an interest subsidy for the first three years; unpaid interest accrues but does not capitalize unless you leave the plan.

SAVE:

• Unpaid interest is entirely waived, preventing loan balances from growing.

Takeaway: SAVE’s elimination of interest accrual is a major advantage for borrowers with low payments and high interest rates.

Which Plan Should You Choose?

The choice between PAYE vs. SAVE depends on your financial goals:

• Stick with PAYE if:
  • You’re close to its shorter 20-year forgiveness timeline, especially for graduate loans.
  • You’ve already made significant progress toward forgiveness and want to avoid extending the repayment period under SAVE.
• Switch to SAVE if:
  • You’re early in repayment and need lower monthly payments to manage cash flow.
  • You have undergraduate loans or want to benefit from SAVE’s interest waiver and higher poverty threshold.
• PSLF borrowers may benefit more from SAVE:
  • Lower payments under SAVE maximize the balance eligible for forgiveness.
  • The interest waiver ensures your balance doesn’t grow even with minimal payments.

Understanding these differences helps tailor your repayment strategy. Use tools like the Loan Simulator from Federal Student Aid to compare options and align your choice with your financial goals. Your student loan program is highly dependent on forecasting your income and financial objectives. Working with a Certified Financial Planner™ Professional, to work in a tailored student debt strategy as part of your financial plan is ideal.

Analyzing SAVE and PAYE with Calculators

When choosing between SAVE (Saving on a Valuable Education) and PAYE (Pay As You Earn), calculators are indispensable tools to understand how repayment amounts change based on income, family size, and loan types. Using the 2024 Federal Poverty Line chart, let’s explore how repayment amounts differ for borrowers with incomes of $50,000 and $100,000 and a family size of 1.

Using Calculators to Estimate Repayment Amounts

Calculators like the Loan Simulator on the Federal Student Aid website allow borrowers to simulate repayment scenarios by considering:

• Income Levels: Adjustments based on AGI ensure a clear understanding of payment obligations.
• Family Size: Larger families benefit from higher poverty exclusions, reducing discretionary income and lowering payments.
• Plan-Specific Benefits: SAVE’s higher poverty threshold (225%) and interest waiver offer advantages, while PAYE’s 150% poverty threshold and shorter forgiveness timeline appeal to certain borrowers.

Scenarios for Borrowers: Income Variations

Scenario 1: Income of $50,000, Family Size 1

• Federal Poverty Line for Family of 1 (2024): $15,060
• PAYE Discretionary Income: $50,000 – ($15,060 × 1.5) = $50,000 – $22,590 = $27,410
  • Monthly Payment: ($27,410 × 10%) ÷ 12 = $228.42
• SAVE Discretionary Income: $50,000 – ($15,060 × 2.25) = $50,000 – $33,885 = $16,115
  • Monthly Payment: ($16,115 × 10%) ÷ 12 = $134.29

Scenario 2: Income of $100,000, Family Size 1

• PAYE Discretionary Income: $100,000 – ($15,060 × 1.5) = $100,000 – $22,590 = $77,410
  • Monthly Payment: ($77,410 × 10%) ÷ 12 = $645.08
• SAVE Discretionary Income: $100,000 – ($15,060 × 2.25) = $100,000 – $33,885 = $66,115
  • Monthly Payment: ($66,115 × 10%) ÷ 12 = $550.96

Example Calculations: SAVE vs. PAYE for Different Incomes

1. At $50,000 Income:
   • PAYE Monthly Payment: $228.42
   • SAVE Monthly Payment: $134.29
   • Insight: Borrowers at this income level benefit significantly from SAVE’s higher poverty threshold, reducing payments by nearly 41%.
2. At $100,000 Income:
   • PAYE Monthly Payment: $645.08
   • SAVE Monthly Payment: $550.96
   • Insight: While both plans require higher payments for higher incomes, SAVE still offers lower payments due to its broader exclusion for discretionary income.

Key Takeaways

• SAVE’s Flexibility: For single borrowers, SAVE consistently provides lower payments due to its 225% poverty threshold. This makes it ideal for borrowers managing other financial priorities or pursuing PSLF.
• PAYE’s Simplicity: PAYE’s straightforward formula and shorter forgiveness timeline can be more appealing for borrowers nearing forgiveness or with graduate loans.
• Importance of Tools: Using calculators like the Loan Simulator allows borrowers to model payment options accurately, ensuring they select the plan that best aligns with their financial goals.

Whether you’re managing a tight budget or aiming for faster forgiveness, calculators clarify how PAYE and SAVE impact your repayment journey.

Comparing PAYE and SAVE with Other Plans

While PAYE (Pay As You Earn) and SAVE (Saving on a Valuable Education) are now the most prominent income-driven repayment (IDR) plans, other options like IBR (Income-Based Repayment) and ICR (Income-Contingent Repayment) still play a role for specific borrowers. Additionally, with SAVE officially replacing REPAYE, understanding how SAVE has enhanced REPAYE’s features is key to evaluating these repayment plans.

1. IBR Plan: How It Differs from SAVE and PAYE

Income-Based Repayment (IBR) remains an option for borrowers, but its benefits have become less competitive compared to SAVE and PAYE due to stricter eligibility requirements and higher payment caps.

Key Features of IBR:

• Eligibility: Requires a partial financial hardship, meaning monthly payments must be lower than those under a standard 10-year repayment plan.
• Payment Cap:
  • 10% of discretionary income for borrowers after July 1, 2014.
  • 15% of discretionary income for borrowers with older loans.
• Forgiveness Timeline:
  • 20 years for newer borrowers (post-July 1, 2014).
  • 25 years for others.

Comparison with SAVE and PAYE:

• SAVE vs. IBR: SAVE’s 225% poverty threshold results in lower discretionary income and smaller payments compared to IBR’s 150%.
• PAYE vs. IBR: PAYE offers similar benefits to new IBR borrowers, with a 10% payment cap and a 20-year forgiveness timeline.

When to Choose IBR:
IBR is a fallback for borrowers with older loans or FFEL loans that do not qualify for PAYE or SAVE. Otherwise, SAVE is generally the better choice.

2. SAVE vs. REPAYE: What’s Changed?

With SAVE officially replacing REPAYE, borrowers no longer have access to REPAYE as of July 2024. Borrowers previously enrolled in REPAYE were automatically transitioned to SAVE, retaining all prior qualifying payments toward forgiveness.

Key Improvements Under SAVE:

• Higher Poverty Threshold: SAVE raises the poverty threshold to 225%, reducing discretionary income and payments for borrowers with lower incomes or larger families.
• Interest Waiver: SAVE eliminates unpaid interest after a scheduled payment is made, ensuring balances do not grow—even with $0 payments.
• Undergraduate Loans Benefit: SAVE caps payments for undergraduate loans at 5% of discretionary income, while REPAYE used a flat 10% for all loans.

Comparison with PAYE:

• SAVE vs. PAYE: While PAYE offers a shorter 20-year forgiveness timeline for all loans, SAVE’s higher poverty threshold and reduced payments for undergraduate loans make it a stronger choice for most borrowers.

3. The Case for ICR (Income-Contingent Repayment)

Income-Contingent Repayment (ICR) remains an option for borrowers, but it is generally less favorable due to its high payment caps and unfavorable interest policies.

Key Features of ICR:

• Eligibility: Open to all borrowers with federal loans, including Parent PLUS loans consolidated into a Direct Consolidation Loan.
• Payment Cap: 20% of discretionary income or what you’d pay on a fixed 12-year repayment plan, whichever is lower.

Comparison with SAVE and PAYE:

• SAVE vs. ICR: SAVE’s 10% cap (or 5% for undergraduate loans) and interest waiver are far more borrower-friendly than ICR’s 20% cap.
• PAYE vs. ICR: PAYE’s shorter forgiveness timeline (20 years) and lower payment cap make it a better choice for most borrowers.

When to Choose ICR:
ICR is primarily suitable for borrowers with consolidated Parent PLUS loans. For most other borrowers, SAVE or PAYE are better options.

Key Takeaways

• SAVE Replaces REPAYE: SAVE’s introduction improves upon REPAYE by increasing the poverty threshold and eliminating unpaid interest.
• IBR and ICR: These are legacy options for borrowers with older loans or specific needs (e.g., Parent PLUS loans). SAVE and PAYE are better for most borrowers.
• SAVE and PAYE: These remain the best options for most borrowers, with SAVE offering lower payments and PAYE benefiting those nearing forgiveness.

Borrowers should use tools like the Loan Simulator to evaluate these plans and determine the best fit based on their income, family size, and loan type.

Case Study: A CFP® Professional’s Analysis of PAYE vs. SAVE

When navigating complex student loan repayment strategies, working with a CFP® Professional and your tax advisor can make all the difference.

Background on the Client

This client, a practicing attorney with significant income, was six years into the PAYE (Pay As You Earn) program and faced a critical decision: remain in PAYE or switch to the SAVE (Saving on a Valuable Education) program. While SAVE offered lower monthly payments, the breakeven analysis showed that staying in PAYE would save her more over time due to its shorter 20-year forgiveness timeline compared to SAVE’s 25 years for graduate loans.

Step 1: Collaborative Tax and Financial Planning

As her CFP® Professional, I partnered with her tax advisor to create a fully integrated financial strategy:

1. Tax Advisor’s Role:
   • Identified above-the-line deductions to reduce her Adjusted Gross Income (AGI).
   • Strategized around business-related expenses and retirement contributions, such as maximizing a Solo 401(k), to further lower her AGI.
2. CFP® Professional’s Role:
   • Identified repayment scenarios for PAYE and SAVE, projecting payments over the remaining forgiveness period.
   • Forecasted her income trajectory and loan balances to align repayment with retirement and wealth-building strategies.
   • Proposed AGI reduction strategies to the tax advisor to further lower student loan payments.

Step 2: PAYE vs. SAVE Analysis

The choice between PAYE and SAVE required a careful cost-benefit analysis:

1. Staying in PAYE:
   • With six years of qualified payments already completed, the client needed only 14 more years for forgiveness under PAYE. Switching to SAVE would have reset the timeline to 25 years, increasing total repayment costs.
2. Advantages of SAVE:
   • SAVE’s higher poverty threshold (225% of the federal poverty line) and elimination of unpaid interest offered lower monthly payments. However, these benefits were outweighed by the longer forgiveness timeline.
3. Break-Even Analysis:
   • The breakeven point for switching to SAVE was longer than the remaining PAYE timeline, making PAYE the more cost-effective option.

Step 3: Collaborative Filing Decision – MFS vs. MFJ

Given her spouse’s significant income, filing status played a pivotal role in the overall financial strategy. As a business owner, she had access to various financial planning tools to reduce her adjusted gross income (AGI) and optimize her student loan repayment terms. In contrast, her husband, as a salaried employee, had limited flexibility to influence their joint AGI. This decision was carefully evaluated in collaboration with her tax advisor, who was responsible for managing their overall tax liability:

• MFS (Married Filing Separately, Head of Household):
  Filing separately allowed her student loan payments to be based solely on her reduced AGI as a family of three. This approach resulted in substantial annual savings on loan payments and positioned her for approximately $200,000 in student loan forgiveness at the end of the repayment program.
• MFJ (Married Filing Jointly):
  While this filing status lowered their overall tax liability, it significantly increased her student loan repayment obligations. When balanced against long-term savings, the higher payments made this option less favorable.

Ultimately, the tax liability incurred by filing MFS was more than offset by the savings in student loan payments and the projected forgiveness amount. This carefully considered strategy proved to be the optimal choice for her unique circumstances, maximizing both immediate cash flow and long-term financial benefits.

Step 4: Implementing the Strategy

The final recommendation included:

• Remaining in the PAYE program to preserve the shorter forgiveness timeline.
• Filing MFS as Head of Household to achieve significant payment reductions.
• Establishing and maximizing her Solo 401(K) contributions to further lower AGI.

This collaborative approach ensured the client achieved measurable loan savings while maintaining progress toward forgiveness.

Key Financial Outcomes

1. Reduced Payments and Preserved Forgiveness: Maintained six years of qualified payments under PAYE while lowering monthly student loan obligations by filing MFS.
2. Maximized Forgiveness: Estimated $200,000 in total loan forgiveness at the end of the program, which offset the tax liability incurred from filing MFS.
3. Integrated Financial Strategy: Collaboration between the CFP® Professional and tax advisor provided a tailored, holistic approach.

Takeaways

This case demonstrates the importance of working with both a CFP® Professional and your tax advisor:

• Holistic Planning: Balancing loan repayment, tax efficiency, and financial goals is key to maximizing savings.
• Collaborative Expertise: Proposals from the CFP® paired with tax advisor input ensure strategies are well-rounded and effective.
• Custom Solutions: Every borrower’s situation is unique, requiring careful evaluation of repayment programs and filing statuses.

By aligning her repayment strategy with broader financial objectives, the client achieved substantial loan payment savings and long-term financial confidence.

How Brickell Financial Group LLC Can Help

Navigating student loan repayment options can be challenging, but with the guidance of Brickell Financial Group LLC, you can develop a clear strategy tailored to your financial goals. As experts in financial planning, we combine cutting-edge tools with personalized insights to help borrowers optimize repayment plans, reduce costs, and align repayment strategies with long-term financial objectives.

1. Personalized Financial Planning for Student Loans

Every borrower’s financial situation is unique, which is why we focus on creating customized strategies. Our team works to understand your income, expenses, family size, and financial goals to create a repayment plan that fits your needs.

• Understanding Your Goals: Whether you aim to minimize monthly payments, maximize forgiveness, or accelerate debt payoff, we align your student loan strategy with your broader financial aspirations.
• Income-Driven Repayment Strategies: We help clients choose between plans like SAVE (Saving on a Valuable Education), PAYE (Pay As You Earn), and other income-driven repayment (IDR) plans.
• Tax Planning Integration: For borrowers with higher incomes or business income, we collaborate with your tax advisor to identify deductions and retirement savings opportunities that can reduce your Adjusted Gross Income (AGI), lowering your monthly student loan payments.

2. Advanced Tools and Comprehensive Analysis to Optimize Repayment Strategies

Our team goes beyond standard calculators to provide a holistic analysis of your student loan repayment options. While tools like the Federal Student Aid Loan Simulator offer valuable insights, we combine these with Right Capital, a cutting-edge financial planning software, to integrate student loan decisions into the bigger picture of your financial objectives and tax liability.

• Loan Repayment Projections:
  We estimate payments for plans such as PAYE, SAVE, and ICR, comparing immediate payment relief against the long-term costs of each strategy.
• Forgiveness Timelines:
  For borrowers pursuing Public Service Loan Forgiveness (PSLF) or forgiveness under IDR plans, we calculate the time to forgiveness and project the total forgiven balance, considering how this fits into your broader financial goals.

Comprehensive Trade-Off Analysis:
Unlike calculators that view repayment plans in isolation, our approach evaluates the impact of repayment choices on your overall financial strategy, including tax liability, retirement savings, and other priorities.

3. Guidance on Transitioning Between Repayment Plans

Switching between repayment plans isn’t always straightforward. At Brickell Financial Group LLC, we guide you through the process to ensure a smooth transition while preserving your progress toward forgiveness.

• Eligibility Reviews: We evaluate your eligibility for plans like SAVE, PAYE, or IBR to ensure you meet the requirements before switching.
• Preserving Forgiveness Progress: For borrowers switching plans mid-repayment, we ensure previous qualifying payments are preserved toward the forgiveness timeline.
• Application Assistance: We assist with completing necessary paperwork, income certifications, and understanding the fine print of each plan.

Why Choose Brickell Financial Group LLC?

With decades of experience in financial planning, we offer a level of expertise that goes beyond the basics of student loan repayment. Our approach includes:

• Comprehensive Financial Planning: We integrate student loan repayment strategies into your broader financial picture, helping you balance debt reduction with goals like retirement, homeownership, or business growth.
• Collaboration with Tax Advisors: For borrowers with complex tax situations, we work alongside your tax advisor to maximize deductions and optimize your filing status for student loan savings.
• Ongoing Support: Student loan repayment isn’t a one-time decision. As your income, family size, or financial priorities change, we help you adjust your strategy to stay on track.

Key Takeaways

• Personalized Strategies: Your repayment plan should fit your unique situation, and our tailored approach ensures you maximize savings while achieving your financial goals.
• Tools and Expertise: With advanced calculators and deep expertise, we make navigating repayment plans simple and effective.
• Seamless Transitions: Whether you’re switching repayment plans or applying for forgiveness, we guide you every step of the way.

Choosing the best student loan repayment plan requires more than just knowing the options—it demands a strategy built for your future. At Brickell Financial Group LLC, we help you take control of your student loans and move confidently toward financial freedom.

Conclusion and Final Recommendations

Navigating the complexities of student loan repayment requires a clear understanding of your financial goals, income, and loan balance. Plans like PAYE (Pay As You Earn) and SAVE (Saving on a Valuable Education) each offer unique benefits and drawbacks, and choosing the right one can significantly impact your financial future.

Key Takeaways

1. PAYE vs. SAVE:
   • PAYE is ideal for borrowers seeking shorter forgiveness timelines and manageable monthly payments tied to discretionary income.
   • SAVE offers enhanced affordability with lower payment caps, particularly for undergraduate loans, and eliminates unpaid interest.
2. Forgiveness Benefits:
   • Both plans provide forgiveness after 20-25 years, or sooner for Public Service Loan Forgiveness (PSLF) participants.
3. Holistic Approach:
   • Lower monthly payments can free up cash flow but may extend repayment timelines. Balancing loan payments with long-term goals like retirement or homeownership is crucial.

Advice for Borrowers

Before selecting a plan, assess your financial situation:

• Income and Family Size: Determine how these factors affect your discretionary income under each plan.
• Loan Balance and Repayment Timeline: Consider how forgiveness timelines align with your financial goals.
• Future Income Growth: If your income is likely to increase, factor that into potential payment adjustments.

For many borrowers, working with a professional can provide clarity. A CFP® Professional can help analyze repayment plans, calculate breakeven points, and create personalized strategies that maximize savings while aligning with your broader financial objectives.

Moving Forward

The right repayment plan is about more than just lowering your monthly payment; it’s about crafting a strategy that supports both your current financial needs and your future goals. Whether you’re considering the SAVE program student loans, the PAYE plan, or other income-driven options, professional guidance can help ensure you’re making the best decision.

Schedule a free initial consultation with Brickell Financial Group LLC today to see how we can help you create a repayment plan that aligns with your financial future. Together, we can help you achieve both short-term savings and long-term financial freedom.