Student loan payments may rise after leaving SAVE — CNBC
Student loan borrowers leaving the SAVE program may face a significant increase in monthly payments if they do not choose another available repayment plan. As CNBC reports, payments could double or even triple for some borrowers.
An alternative to the standard plan
Borrowers who choose one of the other income-driven repayment plans may receive lower monthly payments than under standard options. One such plan is the Repayment Assistance Plan, or RAP, which was launched in July.
RAP sets a monthly payment at between 1% and 10% of the borrower’s income and provides for loan forgiveness after 30 years. The plan also offers a monthly $50 discount for each dependent who meets the established criteria. Standard repayment plans do not provide such a benefit.
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Calculation example
According to an analysis by the advisory platform Summer, a two-person household with an annual income of just over $50,000, $60,000 in student loan debt, and a 6.8% interest rate would pay $690 per month under a standard 10-year plan. Under the RAP plan, the monthly payment in this example would be $158.
Summer’s head of client services, Rich Williams, advised borrowers to calculate their payment under the next-best income-driven plan now, even if they are not switching to it yet. According to him, this will help them plan their budget in advance and prepare for higher payments.
