Save Plan Calculator Student Loan

Last Updated on 04/20/2024 by calculatoracute.com

Introducing SAVE Plan Calculator – Student Loan

What is a Save Plan Calculator Student Loan?

A SAVE Plan Calculator for pupil loans is a tool designed to help debtors estimate their loan repayment amounts under the SAVE (Student Aid Verification for Education) plan.

This calculator commonly requires inputs along with Adjusted Gross Income (AGI), Family Size, Federal Poverty Level (FPL), and information about the borrower’s loans (e.g., undergraduate loans, graduate loans).

Based on these inputs, the calculator calculates the borrower’s discretionary earnings and determines the reimbursement quantity in keeping with the SAVE plan suggestions, taking into account whether the borrower has undergraduate loans, graduate loans, or both.

The Save Plan Calculator Student Loan affords an estimate of the month-to-month or every-year reimbursement quantity to assist debtors in making plans for their price range and managing their student mortgage obligations.

Under the SAVE plan, mortgage forgiveness operates in another way depending on the quantity borrowed.

For borrowers who borrowed $12,000 or much less for either undergraduate or graduate faculty, loan forgiveness is to be had after making bills for 10 years.

This method that in case you fall inside this category and always make bills over 10 years, the final stability of your loan may be forgiven.

This provision is especially beneficial for debtors with lower loan amounts, as they can acquire mortgage forgiveness in shorter duration as compared to people with higher mortgage balances who may want to make bills for 20 or 25 years earlier than becoming eligible for forgiveness.

To understand Save Plan Student Loan, we need to know

Plan Terms

Adjusted Gross Income (AGI)

It is the total amount of income you earn throughout the year after certain deductions are made.

This includes deductions such as contributions to retirement accounts and student loan interest payments. You can find your AGI on line 11 of your tax form.

Family Size

Family size refers to the number of individuals you financially support, including dependent children and other adults who live with you and rely on you for more than half of their financial support.

However, if you file taxes separately from your spouse, you should not include your spouse when determining your family size for certain benefits or calculations.

Federal Poverty Level (FPL)

The Federal Poverty Level (FPL) is a standard used by the government to assess eligibility for financial assistance programs based on the size of a family or household.

It is adjusted annually to account for inflation, reflecting changes in the cost of living.

Discretionary Income

It is the amount of cash you’ve got ultimately after masking important prices.

It’s calculated by way of subtracting a portion of the Federal Poverty Level from your Adjusted Gross Income.

This calculation is designed to defend a certain amount for primary needs, leaving the rest as discretionary income that can be used for non-crucial charges or savings.

Repayment Plans

IBR (Income-Based Repayment)

It is for loans disbursed before July 1, 2024, and sets payments at 15% of your Discretionary Income.

This means that borrowers pay 15% of the income remaining after essential expenses have been deducted, as calculated based on their Adjusted Gross Income and the Federal Poverty Level.

REPAYE (Revised Pay As You Earn), PAYE (Pay As You Earn), and IBR (Income-Based Repayment)

It is for new debtors, which incorporates loans allotted after July 1, 2014, set bills at 10% of your Discretionary Income.

This method that borrowers pay 10% of the earnings final after critical expenses had been deducted, as calculated based on their Adjusted Gross Income and the Federal Poverty Level.

SAVE (Student Aid Verification for Education)

Student Aid Verification for Education from October 1, 2023, to June 30, 2024, sets payments at 10% of Discretionary Income.

However, it’s calculated with a higher percentage of the Federal Poverty Level compared to other repayment plans during this period.

This means that borrowers pay 10% of the income remaining after essential expenses have been deducted, with a portion of the Federal Poverty Level subtracted from their Adjusted Gross Income to determine discretionary income.

SAVE starting July 1, 2024

Starting July 1, 2024, under the SAVE plan, payments are set between 5% and 10% of your Discretionary Income.

If you have solely undergraduate loans, your payment rate is 5%. If you possess solely graduate loans, your payment rate is 10%.

If you have a combination of both undergraduate and graduate loans, your payment rate is determined by a weighted average.

Furthermore, the loan balances considered for this calculation are the original amounts borrowed.

Save Plan Calculator Student Loan Formula

The formula for calculating loan repayment under the SAVE (Student Aid Verification for Education) plan for student loans is as follows:

1. Determine the borrower’s Adjusted Gross Income (AGI), Family Size, and the Federal Poverty Level (FPL) for the applicable year.
2. Calculate the borrower’s Discretionary Income using the formula: Discretionary Income = AGI – (225% of FPL)
3. Determine the percentage of Discretionary Income to be paid based on the borrower’s loan types:
   • If the borrower has only undergraduate loans, the payment percentage is 5%.
   • If the borrower has only graduate loans, the payment percentage is 10%.
   • If the borrower has a mix of undergraduate and graduate loans, calculate a weighted average of the payment percentages based on the original loan amounts.
4. Calculate the repayment amount by multiplying the Discretionary Income by the determined payment percentage.

This formula provides an estimate of the monthly or yearly repayment amount under the SAVE plan for student loans, considering the borrower’s financial circumstances and the types of loans they have.

Example

John has an Adjusted Gross Income (AGI) of $40,000 for the year. He lives with his wife and two children, making his family size four. The Federal Poverty Level (FPL) for a family of four is $26,500.

John has student loans totaling $30,000 for his undergraduate studies and $20,000 for his graduate studies.

Using the SAVE Plan Calculator formula:

Calculate Discretionary Income:

Discretionary Income = AGI – (225% of FPL)

= $40,000 – (225% * $26,500)

= $40,000 – $59,625

= $-19,625 (Since Discretionary Income cannot be negative, it’s treated as $0)

Determine the payment percentage:

Since John has both undergraduate and graduate loans, we calculate a weighted average.

Weighted average = (Undergraduate loan amount * 5% + Graduate loan amount * 10%) / Total loan amount

= ($30,000 * 5% + $20,000 * 10%) / ($30,000 + $20,000)

= ($1,500 + $2,000) / $50,000

= $3,500 / $50,000

= 0.07 or 7%

Calculate the repayment amount: Repayment Amount = Discretionary Income * Payment Percentage = $0 * 7% = $0

In this example, John’s estimated repayment amount under the SAVE plan for student loans would be $0 per month, as his discretionary income is negative and he has a mixed loan type.

FAQ

What is the Save Plan Calculator Student Loan?

The Save Plan Calculator Student Loan is a device designed to help students make plans and manage their student loans successfully.

It facilitates students to estimate their mortgage payments, music their development, and strategize repayment plans.

How does the Save Plan Calculator Student Loan work?

The calculator takes into consideration various factors such as mortgage quantity, interest rate, reimbursement term, and any extra payments to generate an amortization schedule.

Users can enter their mortgage information and options to personalize their reimbursement plan.

What information do I need to use the calculator?

You’ll need details about your student loan, inclusive of the mortgage quantity, interest charge, and the period of compensation.

Optionally, you may encompass data about any greater bills you propose to make towards your mortgage.

What does the calculator provide?

The calculator generates an amortization schedule, breaking down each payment into principal and interest additives.

It suggests the whole quantity paid over the loan period, the overall interest paid, and the projected payoff date.

How can the Save Plan Calculator Student Loan help me?

This tool empowers students to make informed decisions about their student loans.

By visualizing different repayment scenarios, users can identify the most suitable repayment plan based on their financial situation and goals.

Is the Save Plan Calculator Student Loan suitable for all types of student loans?

While it can be helpful for many types of student loans, including federal and private loans, it’s always advisable to consult your loan servicer or financial advisor for specific guidance, especially if your loan has unique terms or features.