The formula for the SAVE plan’s monthly payment calculation can be written as follows:
Monthly Payment = ((AGI – (PL x 2.25)) x 0.05) / 12
In this equation:
“AGI” refers to the Adjusted Gross Income of the borrower. For married couples both holding federal student loans and opting for the SAVE plan, the AGI would be their combined annual income.
“PL” signifies the Federal Poverty Level corresponding to the borrower’s family size.
For instance, let’s consider a single individual with no children living in one of the 48 contiguous states, where the Federal Poverty Level for a family of one is $14,580. If this person has an AGI of $50,000, their monthly payment would be calculated as follows:
Monthly Payment = (($50,000 – ($14,580 x 2.25)) x 0.05) / 12 = $112.41
Hence, under the SAVE plan, a single person with an AGI of $50,000 can expect an approximate monthly payment of $112.41.
Now, let’s consider a married couple without children, living in the same region, both with federal student loans, and opting for the SAVE plan. The Federal Poverty Level for a family of two in this region is $19,610. Suppose each partner has an AGI of $50,000, making their combined AGI $100,000. Their monthly payment under the SAVE plan is computed as follows:
Monthly Payment = (($100,000 – ($19,610 x 2.25)) x 0.05) / 12 = $283.95
So, a married couple with a combined AGI of $100,000 can anticipate a monthly payment of around $283.95 under the SAVE plan.
These formulas provide a general idea of the expected monthly payments under the new SAVE plan. Remember, the actual payment may vary depending on several factors. For the most accurate calculations, consult a financial advisor or utilize a reliable student loan repayment calculator.