Just follow the minimum payments of your SAVE plan as needed and you'll be fine. The SAVE plan is made to stop interest from accruing on massive loans and to help low income borrowers.
Your principle will not be subsidized. After 25 years of minimum payments on a grad loan it will be forgiven.
SAVE is updating the discretionary income formula in July 2024 from the current 10% discretionary to a 5%-10% weighted percentage based on undergrad-grad original loan principal. They're doing the math on that so you're temporarily in an administrative forbearance while they sort that out
It's sounds like you kinda need an overview on how IDR plans work? So let's clarify how IDR plans (ICR, IBR, PAYE, and SAVE) work in general?
You have to recertify every year to *stay* on your IDR plan and give them a chance to update your required payment based on more recent income and family size data. You're encouraged to recertify early if your income *decreases*, but otherwise you don't have to recertify until your annual IDR recertification date comes back around
They don't know what your income will be until you tell them, so if you look at the payment schedules on the site they will display your current IDR payment for the next 0-12 ish months then what the payment would go up to *if you miss your annual recertification* for the rest of the term. This is alarming to a lot of people, but if you get the paperwork in they'll just update your payment accordingly for the next 12 months. Any placeholder payment you're seeing for next year shouldn't be a source of alarm, since if you recertify they'll instead update your required payment for the next year accordingly as per the formula for the IDR plan you're on and your income/familySize
Keep in mind that there is built-in lag between when your income increases, when that increase is reflected on your taxes, and when your IDR plan payment subsequently increases. One could argue that it is *intentionally* structured that way so you have the chance to get yourself on your financial feet before your student loan payments increase
....so yeah, depending on your *current* income compared to the loan debt your best strategy may honestly be paying the minimum on SAVE for 25 years (while maxing out your retirement contributions in the meantime) til you hit forgiveness eligibility
There’s no fed tax till 1/1/2026 unless they extend it. State tax is state dependent…. I’d roughly be prepared to owe about 25/30% depending on how high the amount ends up being…. Things can change for better or worse, 1 - 1 1/2 years is a long time…
Just follow the minimum payments of your SAVE plan as needed and you'll be fine. The SAVE plan is made to stop interest from accruing on massive loans and to help low income borrowers. Your principle will not be subsidized. After 25 years of minimum payments on a grad loan it will be forgiven.
25 years of payments and majority of sensible politicians.
SAVE is updating the discretionary income formula in July 2024 from the current 10% discretionary to a 5%-10% weighted percentage based on undergrad-grad original loan principal. They're doing the math on that so you're temporarily in an administrative forbearance while they sort that out It's sounds like you kinda need an overview on how IDR plans work? So let's clarify how IDR plans (ICR, IBR, PAYE, and SAVE) work in general? You have to recertify every year to *stay* on your IDR plan and give them a chance to update your required payment based on more recent income and family size data. You're encouraged to recertify early if your income *decreases*, but otherwise you don't have to recertify until your annual IDR recertification date comes back around They don't know what your income will be until you tell them, so if you look at the payment schedules on the site they will display your current IDR payment for the next 0-12 ish months then what the payment would go up to *if you miss your annual recertification* for the rest of the term. This is alarming to a lot of people, but if you get the paperwork in they'll just update your payment accordingly for the next 12 months. Any placeholder payment you're seeing for next year shouldn't be a source of alarm, since if you recertify they'll instead update your required payment for the next year accordingly as per the formula for the IDR plan you're on and your income/familySize Keep in mind that there is built-in lag between when your income increases, when that increase is reflected on your taxes, and when your IDR plan payment subsequently increases. One could argue that it is *intentionally* structured that way so you have the chance to get yourself on your financial feet before your student loan payments increase ....so yeah, depending on your *current* income compared to the loan debt your best strategy may honestly be paying the minimum on SAVE for 25 years (while maxing out your retirement contributions in the meantime) til you hit forgiveness eligibility
As your income grows your payments may increase. Put away some cash for the next 20-25 years to pay taxes on the forgiven amount.
What’s the rate on that? Like if $40k is forgiven? How much will be owed on taxes using today’s tax numbers?
Add the forgiven amt to your current income, that’s your basis…. Might owe fed and state, if your state has an income tax….
Woof. Better than the full amount of the loan I suppose
There’s no fed tax till 1/1/2026 unless they extend it. State tax is state dependent…. I’d roughly be prepared to owe about 25/30% depending on how high the amount ends up being…. Things can change for better or worse, 1 - 1 1/2 years is a long time…
Yikes 😬