SAVE Plan for Student Loans: A Guide for Resident Physicians
By Jared Andreoli, CFP®, CSLP®
We can all agree that pursuing higher education should be a path to a brighter future—not crippling debt. And this is especially true for young physicians balancing both professional and financial obligations.
So, with student loan payments resuming this fall, physician borrowers will want to be aware of a new repayment plan that offers relief to those with education debt: the Savings on a Valuable Education (SAVE) plan. The SAVE plan, which launched in August 2023, could be a game-changer when it comes to repaying student loans, with potentially lower monthly payments.
But how will it help young physicians? Let’s explore the specifics of the SAVE plan to help you determine whether this new student loan repayment plan could benefit you.
What Is the SAVE Plan?
It’s important to note that SAVE is an income-driven repayment (IDR) plan, which means repayment is based on your income and family size—not necessarily how much you borrowed. This means that if you are a resident or fellow, you may benefit from reduced payments.
What’s more, the SAVE plan has stepped in for the Revised Pay As You Earn (REPAYE) Plan, so borrowers on the REPAYE plan automatically benefit from the new SAVE plan. Other IDR plans will be eliminated, but borrowers can continue to stay on them if it makes the most sense for their situation—as long as they don’t enroll or reenroll after July 1, 2024.
Compared to other plans, SAVE could considerably lower an individual’s payments and may help save thousands per year. Even better, the plan also aims to ensure that your balance continues to drop as long as you make the required payments—instead of climbing with unpaid interest. While there is no blanket loan forgiveness on the horizon, SAVE may still help forgive the remaining balance after a certain number of years. The SAVE plan is eligible for Public Service Loan Forgiveness.
Benefits for Residents and Fellows
According to the August 2023 White House briefing, the SAVE plan has many important benefits with the aim to offer relief to those forging their medical careers while carrying substantial education debt:
Reduced monthly payments: Under the SAVE plan, payments are capped at 10% of your discretionary income—and are set to drop even further to 5% by next summer for undergraduate loans. That means most borrowers will experience lower payments compared to other IDR plans.
Though the terms are more favorable for undergraduate loans, if you are a borrower with both undergraduate and graduate loans, you will pay a weighted average of between 5-10% of your income based on the original loan balances. What’s more, borrowers who earn $32,800 or less (or $67,500 for a family of four) will not owe any payments.
Interest cap: Perhaps the most significant benefit to physician borrowers is the interest benefit. With SAVE, borrowers who make the required payments won’t have to worry about their loan amounts growing with unpaid interest. That’s because the plan eliminates the interest payment not covered by the borrower’s payment.
So, if you have $100 of interest accumulating each month and your monthly payment is $75, the additional $25 would not be charged provided your scheduled payment is made.
Early loan forgiveness: From 2024 onward, borrowers owing less than $12,000 on their student loans will be eligible for loan forgiveness after completing only 10 years of payments under the SAVE plan. That’s a significant decrease from the typical IDR plans which require all borrowers to pay on their loans for at least 20-25 years before their loans can be forgiven.
Each additional $1,000 over $12,000 will add an additional year of payments (up to a maximum of 20-25 years) before allowing for loan forgiveness. For example, if you have $17,000 left in student loans, your loan will be forgiven in 15 years.
Is SAVE Right for You?
Let’s face it: the last thing young physicians need is to worry about hefty education debt. You are honing your craft, growing your career, and forging your legacy. Without the right guidance, it can be tough to navigate education debt while still pursuing your other professional and financial goals. That’s where we come in.
Whether you’re looking to see whether the SAVE plan is right for you or if you need a plan for paying down student debt, we at Simplicity Financial would love to help.
Get started by scheduling a free consultation, or reach out to us by emailing jared.andreoli@simplicityfinancialllc.com or calling 414-207-6473.
About Jared
Jared Andreoli, CFP®, CSLP®, is president and financial planner at Simplicity Financial, a fee-only RIA dedicated to helping early-career physicians conceptualize their financial picture and achieve their financial goals. Jared specializes in devising individualized financial road maps for clients, and he loves nothing more than a full day meeting with clients who value his partnership to solve problems—big and small.
After college, Jared spent six years working as a mutual fund administrator for a large company. While he learned an immense amount about the financial world, he was missing the personal connection of working with individual clients. Combining his passion for finance and personal connection, he established Simplicity Financial in 2017.
Jared has a degree in finance with a concentration in financial planning from Western Kentucky University, along with the CERTIFIED FINANCIAL PLANNER™ (CFP®) and a Certified Student Loan Planner (CSLP®) certifications. Outside of work Jared enjoys cooking and traveling. He played baseball in college and still coaches occasionally. He and his wife recently welcomed a daughter, who occupies most of their time. To learn more about Jared, connect with him on LinkedIn.