I am staring at my Marcus HYSA account. If we wanted to, we could pay off my student debt when it resumes next month, and be done with it. However, a new student loan repayment plan recently replaced the REPAYE program. Known as the SAVE Repayment program, this new and improved loan forgiveness program presents a reason not to pay back my student debt. It is an AMAZING program. Because of it, we are choosing to hold onto the student debt. Here is why!
What to Know about the SAVE Repayment program
- The SAVE Plan significantly decreases monthly payments by increasing the income exemption from 150% to 225% of the poverty line. Income exemption means that if you earn less than 225% of the Poverty Line as determined by this chart, then you do not owe anything for your debt. To calculate this, determine the number of family members in your household. Match it with the poverty income level using the chart. Multiply the income level by 2.25. If you make less than that number then you don’t have to make payments.
- 100% of remaining interest is eliminated after a scheduled payment is made. This is the most important reason why we aren’t paying it off. As long as you make the minimum monthly payment, the interest will not be added to your loan total. This works in the favor of those with massive student debt. Let’s assume you earn $100k per month and your total student debt is $400k. Then you’re monthly payment is around $834. Meanwhile, your interest is $2,267! That means your monthly payment doesn’t cover the interest of the loan. Under the new program, the interest is eliminated! That’s a huge difference! Before SAVE, the loan continues to grow if only minimum monthly payments were made. In fact, when we calculated it back in 2017, my loan would have ended up at $1, 400k after the loan repayment program. With SAVE, my loan will remain at $405k unless I miss my payments!
- The SAVE Plan excludes spousal income for borrowers who are married and file separately. This is another great change. Especially for whose spouse earns a decent income. Before, the monthly payments were determined using both the borrower and the spouse’s income. Since SAVE only uses the borrower’s income, that minimum monthly payment is decreased! Meaning you need to put in less money in order to keep the loan amount the same.
More changes are promised to take effect July 2024.
I changed my mind again.
In this post, I wrote about how we changed our minds. We chose to take a majority of our savings and put it into a single-family residence for our growing family. I am a homebody who needs a homebase. Currently, there are no plans to pay off the student debt. We will prioritize other assets as we did during the pandemic forbearance. If the repayment program changes once again to something that would cause my debt to grow, I may reconsider. For now, I changed my mind.
I am pivoting based on the information I have. I am not giving up on building wealth. At the same time, it would be foolish to stick to my original payoff plan for the sake of identity. I was The Debtist. I was afraid of money. My debt defined me. But it is safe to say that I’ve found a way to walk away from that past. No longer will I let debt define me. I am letting go, and finding a way through.
I wanted to pay off my debt because I psychologically needed to. But I reached financial independence when I walked away from a job I hated, facing uncertainty during the pandemic. It was the best decision I have ever made. I chose myself and my values over money. By giving myself the space to grow, I changed the way I viewed myself and money. I am not just me, and money is just money.
It’s nice to learn that I can choose over and over again.