How to Navigate Military Student Loan Repayment with the SAVE Plan

Military members can take advantage of programs like the GI Bill to pay for college as well as other loan repayment programs. For those who are actively paying back student loans, there’s a new repayment option called the SAVE plan that can lower costs — potentially leading to $0 payments. 

In this guide, learn more about the SAVE plan, how it works, and how you can manage military student loan repayment and other education benefits. 

What is the SAVE plan?

The Saving on a Valuable Education (SAVE) plan is the latest repayment option under the income-driven repayment plan (IDR) umbrella. It revamped and replaced the Revised Pay As You Earn (REPAYE) plan. 

Some major changes on SAVE compared to REPAYE are:

• Borrowers with only undergraduate loans will pay just 5% of discretionary income starting July 2024.
• The plan now allows for excluding spousal income if filing separately.
• Interest charges your payment doesn’t cover are paid by the government.
• Higher income exemption. 

Its primary goal is lowering monthly payments for all federal student loan borrowers who are eligible. 

How the SAVE plan works

The SAVE plan offers eligible borrowers a way to make monthly payments more affordable. All income-driven repayment (IDR) plans work by using a set percentage of your discretionary income to determine your monthly payments. 

SAVE offers a significant benefit for borrowers who only have undergraduate loans by cutting payments to 5% of income. Other IDR plans typically use 10% to 20% of your income for your payments. Those with graduate loans won’t pay more than 10%. 

While on the SAVE plan, your payments count toward student loan forgiveness — either through the Public Service Loan Forgiveness Program (PSLF) or income-driven repayment forgiveness. 

Borrowers with just undergraduate loans can get IDR forgiveness after 20 years, while borrowers with graduate loans are eligible after 25 years. 

Eligibility and application process

You must have federal Direct Loans from the Department of Education to qualify for the SAVE plan. If you have FFEL or Perkins Loans, you must use a Direct Consolidation Loan to qualify. 

If you don’t consolidate, other types of loans are ineligible for this loan repayment program. Additionally, if your loans are in default or if you have Parent PLUS Loans or a consolidation loan used to pay off a Parent PLUS Loan, you’re not eligible for the SAVE plan. 

If you previously were on REPAYE, then you’re automatically enrolled in the SAVE plan. If you’re on a different repayment plan, contact your loan servicer and apply for SAVE using the IDR Plan Request Form.  

GI Bill for education costs 

Military members may qualify for the Post-9/11 GI Bill, which helps cover some educational costs for college, typically up to 36 months. To qualify, you must meet the eligibility requirements, which include active duty service on or after September 11, 2001, and have been honorably discharged. 

Under this program, you can get assistance for the following:

• Tuition and any associated fees.
• Housing.
• Books and school supplies. 

The amount of financial assistance you receive is determined using a tiered system based on how long you served. Military members who serve a minimum of 36 months qualify for 100% of the benefit. The exact amount also varies by type of school. 

These benefits can significantly reduce educational costs for those who apply for the GI Bill, but they might not cover all school expenses. From there, many military members take on student loan debt. In fact, close to six out of 10 military veterans have student loans, according to a survey by The Pew Charitable Trusts. 

The reason? To cover living expenses and childcare. 

Notably, the GI Bill benefits don’t help you pay off your student loans. There are loan repayment programs (LRP) available such as the Army LRP. However, you might not be able to claim both GI benefits and LRP benefits. 

When it comes to educational attainment, 66% of military members have a high school degree or have some college without a degree, according to a consensus study report on military families by the National Academies of Sciences, Engineering, and Medicine. 

Eight percent have an associate’s degree, 15% have a bachelor’s degree, and another 8% have an advanced degree. 

Can military members get student loans forgiven?

If you’re thinking of taking out student loans or currently have them, navigating military student loan repayment can be challenging. There’s some good news — military members who have federal student loans might qualify for student loan forgiveness. 

Active military members who have 10 years of service under their belt might qualify for student loan forgiveness under the Public Service Loan Forgiveness Program (PSLF). If you don’t commit to public service for that long, you can also get forgiveness through an IDR plan. 

The SAVE plan can be a fantastic option for either student loan forgiveness program due to its generous benefits and low payments. If you want to obtain forgiveness, it makes sense to pay the lowest amount on your student loans so that eventually you can get the remaining balance canceled.

How Basic Allowance for Housing (BAH) can lower student loan payments

One of the military benefits available is a Basic Allowance for Housing (BAH). This provides funding for a portion of your housing costs — and it might actually help you get lower student loan payments. 

Income-driven repayment programs, like SAVE, use your income to calculate your monthly payments. The BAH isn’t included in your Adjusted Gross Income (AGI). Your cash compensation is likely lower than what you might get in the civilian sector thanks to this housing benefit. 

Let’s say your income is just below $30,000, and you’re on the SAVE plan. You could qualify for legitimate $0 loan payments that count toward forgiveness. Even if your income is a bit higher, your payments might be very low on the SAVE plan. If you stick to military service for a decade, the remaining balance will be forgiven tax-free under PSLF. 

How enlisted personnel can maximize student loan repayment 

Enlisted personnel can maximize their military student loan repayment in a number of ways. 

• Take advantage of BAH. Since your housing allowance isn’t included as part of your AGI, you may score lower student loan payments and have lower housing costs. 
• Sign up for the SAVE plan. If you have only undergraduate loans, your payments could be slashed to just 5% of your income. 
• Deduct student loan interest. You might be able to deduct a portion of your student loan interest — up to $2,500. 
• Consider forgiveness. Some military personnel may have student loan debt from an unfinished degree. Whether you have a degree or not, getting your loan balance forgiven through the Public Service Loan Forgiveness Program or income-driven repayment can offer tremendous relief. 

Officer student loan repayment strategies 

A high school education is required for most personnel, but an undergraduate degree or higher is generally required for an officer. As a result, you might have more debt to manage as part of your military student loan repayment if you’re an officer. Here are some things to consider. 

• Sign up for SAVE. You can save on payments if your loans are only from undergrad at just 5% of your income. If you have a graduate degree, payments are calculated at 10%. There’s a weighted average for borrowers with both types of loans. 
• Assess career commitment. Getting forgiveness through PSLF requires a 10-year commitment. Think about your mid-range and long-term career plans and consider if you’ll stick around or not. 
• File taxes separately. For the SAVE plan and other IDR options, if you file separately only your individual income is used to calculate your payment, not your joint income, which was previously the practice under REPAYE. 

How military service members with larger families could save on SAVE

In the military, about 50% of members are married and 39% have children, according to the same National Academies of Sciences, Engineering, and Medicine report. Military service members with large families could save even more on the SAVE plan. 

That’s because the income exemption is up to 225% from 150% of the poverty line. The SAVE plan bases payments on both income and family size and with this new benefit, it could work in your favor. 

For example, if you have a family size of four or five people and earn up to $60,000, you could qualify for $0 payments based on data from StudentAid.gov. That on top of the interest subsidy with SAVE can be a major benefit if you’re supporting a big family on a limited income. 

Is the military a good way to pay off student loans?

The military offers a number of benefits to cover higher education costs including the GI Bill and other loan repayment programs. In addition, there are other benefits for military student loan repayment. 

• Interest rate cap. Thanks to the Servicemembers Civil Relief Act (SCRA), any student loan interest you have before serving is capped at 6% while on active duty. 
• Deferment. There’s a specific military service deferment to put payments on hold while on active duty. You may also defer after your period of active duty as well. 
• 0% interest. In the event you’re serving in a hostile area and getting special pay, you won’t need to pay any interest for a period of up to 60 months. 
• HEROES Act Waiver. Through this option, you can get some documentation requests waived if you’re serving. For example, documentation for the SAVE plan. This allows you to request that your payment amount doesn’t change. 
• Department of Defense (DOD) repayment. In some situations, your loans may be repaid by the DOD. 
• PSLF forgiveness. Military service counts toward PSLF, so you may be eligible for forgiveness after 10 years of full-time qualifying employment. 
• Veterans Total and Permanent Disability Discharge. If you became disabled while serving, you may qualify for loan discharge. 

These benefits can help with military student loan repayment and make everything easier to manage. 

If you still have questions about how the SAVE plan can help or what options you have, book a consultation with Student Loan Planner to get a plan designed for your situation.