SAVE Plan vs Standard Repayment: The $30,000 Decision Most Borrowers Get Wrong

The SAVE Plan promises lower monthly payments and loan forgiveness after 20-25 years. Sounds perfect, right? But for many borrowers, it's actually the more expensive option. Here's how to figure out which path is right for you.

The Two Paths Explained

SAVE Plan

Payments = 10% of discretionary income
Forgiveness after 20-25 years
$0 payments if income is low enough
Potential tax bomb on forgiven amount

Standard 10-Year

Fixed payments for 10 years
Lowest total interest paid
No tax consequences
Higher monthly payments

The Math Most People Ignore

Let's run real numbers. Say you have $50,000 in student loans at 6% interest and earn $60,000/year.

$50,000 Loan, 6% Interest, $60K Income

	Standard	SAVE
Monthly payment (year 1)	$555	$287
Total paid over life of loan	$66,600	$89,400*
Forgiveness amount	$0	$0**
Time to payoff	10 years	20 years

*Assumes 3% annual income growth. **At this income, the loan is paid off before forgiveness kicks in.

Wait—no forgiveness? That's the catch. If your income is high enough (or grows over time), you end up paying off the loan before the 20-year forgiveness mark. You just took longer and paid more interest.

Model your student loan payoff

Compare different payment amounts and see total interest under each scenario.

When SAVE Actually Makes Sense

Debt-to-income ratio over 1:1

If you owe more than your annual income (e.g., $80K debt on $50K salary), forgiveness is likely.

Public service career

PSLF forgives remaining balance after 10 years of qualifying payments—tax-free.

Unpredictable income

Freelancers, entrepreneurs, or commission-based workers benefit from payments that flex with income.

Cash flow crisis

If standard payments would leave you unable to afford rent, SAVE provides breathing room.

When Standard Is the Better Deal

Growing income

If you expect raises, promotions, or higher-earning years ahead, SAVE payments will grow with you.

Low debt relative to income

$30K in debt on a $70K salary? You'll likely pay it all anyway—might as well pay less interest.

Can't stomach 20 years of payments

The psychological weight of debt for two decades is real. Sometimes paying it off faster is worth it.

Don't forget the tax bomb

Unless Congress extends the exemption (currently through 2025), forgiven amounts count as taxable income. $50K forgiven could mean a $15K+ tax bill.

The Decision Framework

Ask yourself these questions:

Can I afford standard payments? If not, SAVE is your answer (for now).
Will I qualify for PSLF? If yes, SAVE + PSLF is almost always the best path.
Is my debt more than my income? If yes, SAVE likely saves money. If no, run the numbers.
Do I want to be done in 10 years? Standard gets you there. SAVE takes 20+.

The Bottom Line

Income-driven repayment is a tool, not a universal solution. For borrowers with high debt and modest income, SAVE can be a lifesaver. For borrowers who can afford standard payments, it's often just a way to pay more interest over a longer period.

Run the numbers for your specific situation. The difference could be $30,000 or more.