The Saving on a Valuable Education (SAVE) plan is the newest income-driven repayment (IDR) option supported by the Department of Education.
Single mothers receive more student loan forgiveness under the SAVE plan than married parents.
Families with one wage earner, like single parents, benefit more from the SAVE plan’s definition of discretionary income.
Find out how to apply for the SAVE plan, which offers lower monthly payments, extra interest benefits, and more forgiveness on the principal amount – especially for unmarried parents.
Applying for Debt Forgiveness
Many people with student loan debt can apply for the SAVE plan, not just single mothers who often benefit the most. The initial application process takes about ten minutes, and after ten years of reduced payments, you can begin receiving forgiveness.
The SAVE plan becomes a college grant when you make no payments for ten to twenty years and then receive complete forgiveness. No wonder the Supreme Court has put the program on pause.
Application
You can apply for the SAVE plan by logging into your student aid profile or creating a new account.
You will need to take several steps.
- Confirm that your contact information is correct.
- Review the loan information on file.
- See which loans are eligible for the SAVE plan.
- Confirm and update any personal information, including marital status and number of dependent children.
- Provide your income information via import from the IRS, uploading documentation, or self-reporting through your loan servicer.
- Review your current IDR plan and switch to SAVE if desired.
- Agree to the government’s terms and conditions.
Discretionary Income Bias
The SAVE plan can help single mothers and fathers get more student loan forgiveness because it defines discretionary income in a way that favors one-earner families.
Under the SAVE plan, discretionary income is what remains of your adjusted gross income after subtracting 225% of the federal poverty line amount for your family size.
Understanding what adjusted gross income and federal poverty guidelines mean is vital to successfully applying for the SAVE plan.
Adjusted Gross Income
Single mothers often have low adjusted gross incomes (AGI), total income minus eligible adjustments.
Other government benefits for single parents use similar income rules. You should ensure that you do not report too much income or miss out on subtractions that lower your AGI.
Talking to a tax expert is wise because it can affect your benefits
Total Income
Single mothers often have low incomes. Earning more while raising kids alone is hard, but certain income types don’t count against them.
- Total income includes wages, dividends, capital gains, business and retirement income, tips, rents, interest, stock dividends, and more.
- Total income excludes child support payments or alimony received from divorce or separation agreements dated after December 31, 2018.[i]
Eligible Adjustments
Single mothers don’t get special breaks when subtracting certain costs from their income.
Examples of eligible income adjustments include half of any self-employment taxes paid, self-employed health insurance premiums, contributions to specific retirement accounts, educator expenses, and student loan interest paid.
Poverty Guidelines
The federal poverty line is calculated based on family size, which makes it easier for single mothers to get help from the SAVE plan. The more children per wage earner in a household, the more likely they are to qualify for benefits.
Let’s look at a simple case to show how this works.
Imagine a single mom with two kids who earns $58,000 a year. Her discretionary income is $0 because her earnings are the same as the cut-off for her family size.
- Poverty guideline for a 3-person household: $25,820
- 225% of the federal poverty level: $58,095
Now, consider a married mom with two kids. Both parents earn $58,000 annually or $116,000 together. Their discretionary income is $45,800 because their combined income is more than the cut-off for a family of four.
- Poverty guideline for a 4-person household: $31,800
- 225% of the federal poverty level: $70,200
- Discretionary income is $116,000 minus $70,200
Source: Health & Human Services
3 Loan Forgiveness Types
We can illustrate the three types of student loan forgiveness under the SAVE plan using our example of a single mother of two children earning $58,000 annually,
She has smaller monthly payments and more interest and principal forgiven than her married counterpart.
Payment Size
Our single mother’s monthly student loan payments are $0, while her married counterpart pays more. The SAVE plan specifies that borrowers must pay a specific percentage of discretionary income each month.
- Undergraduate loans: 5%
- Graduate loans: 10%
| Monthly Discretionary Income | Undergraduate 5% | Graduate 10% |
|---|---|---|
| Unmarried: $0 | $0 | $0 |
| Married: $3,817 | $191 | $382 |
Interest Benefit
Our single mother qualifies for a significant student loan interest benefit while her married counterpart receives less. The SAVE plan eliminates 100% of the monthly interest after you fully pay.
Our single mother maximizes the interest benefit. With a full monthly payment of $0, the government would cover 100% of interest charges against a fixed principal amount.
The married mom receives a smaller interest benefit. Her full monthly payments reduce the remaining interest charges the government might cover at 100% in two ways.
- The amount applied to interest reduces the monthly government benefit.
- The amount applied to the principal reduces the interest accrued over time.
Principal Forgiven
Our single mother qualifies for forgiveness of her entire student loan balance. At the same time, her married counterpart pays off more of her debt. The SAVE plan pardons borrowers making full payments over ten to twenty-five years.
| Years of Full Payment | Undergraduate Debt Forgiven | Graduate Debt Forgiven |
|---|---|---|
| 10 | $12,000 | $12,000 |
| 19 | $20,000 | $20,000 |
| 20 | $21,000 + | $21,000 |
| 24 | $25,000 | |
| 25 | $26,000 + |
Our single mother can pay nothing and still receive forgiveness on all her qualifying undergraduate and graduate student loans without limit.
The married mother receives less forgiveness because she must make significant payments over time, reducing the balance owed with each installment.
- Undergraduate payments total $45,840 ($191 per month for 240 months)
- Graduate payments total $114,600 ($382 per month for 300 months)
As you can see, the SAVE plan encourages mothers with student loan debt to stay single. If they marry, they might escape poverty, become financially independent, and stop voting for Democrats.
[i] Form 1040 Instructions 2023 Page 85.
