The Saving on a Valuable Education (SAVE) plan is a new student loan repayment option backed by the Department of Education.
The SAVE plan allows single mothers with moderate incomes to make no payments for twenty years and get full forgiveness.
A student loan you do not have to repay is like a college grant. It just has a different name and process.
This article explains how the SAVE plan can help single mothers get $57,500 for an undergraduate degree and over $200,000 for graduate studies without any payments.
SAVE Plan Starts as a Loan
Student loans are not college grants. Borrowers start with the intention to repay. However, the SAVE plan can later relieve low-income earners of this duty. Single mothers are likely to qualify for this relief.
Learn how to apply and find out how much money you can get.
Application Process
Single mothers start by taking out a federal student loan through the Department of Education. Most low-income applicants qualify because financial need is the main requirement.
Complete the Free Application for Federal Student Aid (FAFSA®) form to get started. The Department of Education uses this application to decide eligibility for Pell grants, TEACH grants, scholarships, work-study funds, and loans.
Funding Amounts
The federal government allows single mothers to borrow more money to fund college expenses. They qualify as independent students when their children are legal dependents.
This chart shows the borrowing limits by undergraduate year for dependent and independent students.
| Yearly Limit | Dependent Students | Independent Students |
|---|---|---|
| 1st | $5,500 | $9,500 |
| 2nd | $6,500 | $10,500 |
| 3rd & beyond | $7,500 | $12,500 |
| Aggregate | $31,000 | $57,500 |
Single mothers can borrow up to $57,500 for their undergraduate studies. If they continue in a graduate program, they can finance up to the full cost of attendance through PLUS loans, which can easily exceed $200,000.
Next, we explore if the SAVE plan will forgive these staggering sums, converting loans into grants.
SAVE Plan Becomes a Grant
The SAVE plan can turn a student loan into a grant for low-income single mothers during repayment. The rules allow for 20 years of $0 payments, after which the loan and interest are forgiven.
You can apply for the SAVE plan by logging into your student aid profile or making a new account. Apply for the SAVE plan after you graduate from your program.
Zero Monthly Payment
The SAVE plan can turn student loans into grants by offering $0 monthly payments. Single mothers are more likely to pay nothing because federal poverty guidelines favor households with one parent and children.
Under the SAVE plan, your loan type and discretionary income decide your full monthly payment.
Loan Type
The type of loan influences the minimum monthly payment. The SAVE plan requires households to pay 5% of discretionary income for undergraduate loans. For graduate PLUS loans, the payment is 10%.
This chart shows the full monthly payment for both loan types at different discretionary income levels.
| Monthly Discretionary Income | Undergraduate Loans @ 5% | Graduate Plus Loans @ 10% |
|---|---|---|
| $10,000 | $500 | $1,000 |
| $5,000 | $250 | $500 |
| $0 | $0 | $0 |
The monthly payment is zero for both loan types when discretionary income is zero or less.
Discretionary Income
The government defines discretionary income as the amount above 225% of the federal poverty level for your household size. The chart shows that this definition favors families with many children and one wage earner, like single-mother households.
| Household Size | Federal Poverty Level | 225% |
|---|---|---|
| 2: 1 parent, 1 child | $20,440 | $45,990 |
| 3: 1 parent, 2 children | $25,820 | $58,095 |
| 4: 1 parent, 3 children | $31,200 | $70,200 |
| 5: 1 parent, 4 children | $36,580 | $82,305 |
For example, a single mother with three children earning $70,000 yearly would have a discretionary income below zero. Her full monthly payment would be zero for both loan types.
Single mothers can easily overstate their adjusted gross income and lose out on significant student loan forgiveness. Do not count child support and alimony. Also, do not omit eligible adjustments like contributions to retirement accounts.
Interest Benefit
The interest benefit is another way the SAVE plan turns student loans into grants. The government covers all accrued interest when the borrower makes the full monthly payment.
For example, a single mother with three children earning $70,000 a year would not incur interest charges because her monthly payment is zero. Her discretionary income is below zero, so she qualifies for the interest benefit.
Loan Forgiveness
Eventual forgiveness is the third way the SAVE plan turns student loans into college grants. The government forgives the remaining balance for borrowers who make full payments for 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 + |
For example, a single mother with three children earning $70,000 a year would pay $0 monthly for twenty or twenty-five years, and the government would forgive the entire balance.
Many people might consider $70,000 a decent annual income. However, the government classifies it as low-income for four-person households, allowing single-parent families to benefit significantly from the SAVE plan.
In summary, a “low-income” single mother with three children earning $70,000 can receive over $250,000 in free college funding from the government.
- Undergraduate: $57,000 with zero monthly payments, no interest accumulation, and complete forgiveness after twenty years
- Graduate: $200,000 or more with zero monthly payments, no interest accumulation, and complete forgiveness after twenty-five years
