{"id":16324,"date":"2023-07-03T09:19:34","date_gmt":"2023-07-03T14:19:34","guid":{"rendered":"https:\/\/www.fitbux.com\/articles\/?p=16324"},"modified":"2024-03-18T10:38:36","modified_gmt":"2024-03-18T15:38:36","slug":"paye-vs-save-vs-ibr","status":"publish","type":"post","link":"https:\/\/www.fitbux.com\/articles\/paye-vs-save-vs-ibr\/","title":{"rendered":"PAYE vs SAVE vs IBR: The Differences Between These Plans"},"content":{"rendered":"

When it comes to student loan repayment things get confusing very fast.\u00a0 Especially when it comes to income driven repayment plans<\/a>.\u00a0 Therefore, I break down the primary differences between PAYE vs IBR vs SAVE in this article so you can compare easily compare them.\u00a0<\/p>\n

I’ve included suggestions for when you should possibly use PAYE vs IBR vs SAVE.\u00a0<\/p>\n

Summary Of Similarities<\/h2>\n

Before diving into the differences, let\u2019s briefly summarize the similarities between PAYE, IBR and SAVE:<\/p>\n

    \n
  1. All are income-driven student loan repayment plans;<\/li>\n
  2. Your payments are capped at a percentage of your discretionary income<\/a>; <\/li>\n
  3. They only apply to Federal student loans, therefore if you want to use one of these plans do not refinance your Federal student loans<\/a>;<\/li>\n
  4. Each forgives the amount you owe after a given period of time; <\/li>\n
  5. The forgiven amount is treated as regular income and taxed as such; and<\/li>\n
  6. Married filing separately vs jointly<\/a> will effect your overall monthly payment. I.e. If you file separate, your monthly payment is based on your income and Federal student loan debt instead of combined amounts. <\/li>\n<\/ol>\n

    PAYE vs IBR<\/h2>\n

    PAYE and IBR are essentially the same thing.  The only difference is which one you qualify and this is based on when you took your first Federal student loans.<\/p>\n

    You can only qualify for PAYE if you have no loans prior to 10\/2007 and at least one loan after 10\/2011. <\/p>\n

    Borrowers qualify for IBR if they borrowed for the first time after 7\/2014.<\/p>\n

    Note: There are two IBR plans: New and Old IBR.  In this article I’m only referencing New IBR.  For more info on Old IBR check out our income-driven repayment plan guide<\/a>.<\/p>\n

    The rest of this article will treat PAYE and IBR as the same thing and compare them to the new SAVE student loan repayment plan<\/a>.<\/p>\n

    Difference #1: Length Of Repayment<\/h2>\n

    PAYE and IBR are 20 years long for both undergrad and graduate loans.  This means if you are on this plan for 20 years, all loans are forgiven<\/a> and the remaining balance is taxed.<\/p>\n

    SAVE is 20 years long if you only<\/strong><\/span> have undergraduate loans.  If any<\/u><\/strong> of your loans are from graduate school, the term is 25 years.  This would apply to all your loans<\/u><\/strong>, i.e. your undergrad and graduate school loans<\/a> would be on a 25 year term.<\/p>\n

    This is an extremely important when comparing PAYE, IBR, and SAVE because the extra 5 years can cost you a lot.  I will discuss the cost later on in the article.<\/p>\n

    Difference #2: Interest Deferral<\/h2>\n

    In our income-based repayment guide<\/a>, we discuss how the difference between your interest charge and the required monthly payment is deferred onto the loan. Therefore, most borrowers will be deferring interest<\/a>.<\/p>\n

    On PAYE and IBR, you defer 100% of the interest for unsubsidized loans. For subsidized loans, the government pays the deferred interest for you for 3 years. Thereafter, you defer 100% of the interest on subsidized loans as well.<\/p>\n

    On SAVE, the government pays 100% of the deferred interest on all Federal loans. Therefore, your loan balance doesn’t grow.  We refer to this as the SAVE interest subsidy.<\/p>\n

    To illustrate the difference of PAYE vs SAVE, I\u2019ll use the following example:<\/p>\n