How to pay off student loans FAST and CHEAP using SAVE
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- čas přidán 21. 07. 2024
- UPDATE: there is a lot of variation in experiences of people trying this hack, some people have said their overpayment went to interest. Will be posting an updated video which includes the following steps to take -
1. send in your required minimum SAVE payment
2. wait for the rest of the interest to be waived on your account
3. THEN send in the overpayment and request it be NOT be applied to future payments (so it goes to principal)
please keep an eye on the channel for the updated vid. -k, 4/5/24
If you're trying to figure out how to pay off your student loans fast and cheap, this video is for you.
The SAVE student loan repayment plan is awesome, but did you know you can pay off your student loans way faster and way cheaper than on the standard repayment plan by using SAVE?? YES! You can both save money and save time on paying off your student loans by using this student loan payoff method.
But this student loan hack to save thousands in interest isn't for everyone - watch to learn if this could work for you!
🎁 Download my free Student Loan Forgiveness Cheat Sheet that goes over 13 different federal student loan forgiveness programs 🎁
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Wanna read a good money book for beginners?
"The Index Card" by Helaine Olen and Harold Pollack
- Get it from your public library: www.worldcat.org/oclc/928750850
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...Looking for a book a bit more advanced?
"Dumb Things Smart People Do With Their Money" by Jill Schlesinger:
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- Get it from a local bookstore: www.indiebound.org/book/97805
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0:00 - 1:11 SAVE super power
1:12 - 3:10 how paying more on SAVE can save you thousands on student loans
3:11 Requirements for using this student loan paydown method
3:34 - Reasons NOT to use this student loan paydown method
6:05 - What you MUST do to overpay on your student loans
Thanks. Yeah this is my strategy. Just consolidated to Direct and selected the SAVE plan. Now to see if I can over pay to the principle. If it doesnt work then I will just ride out the plan at the low payment for 20 years and use that money to invest.
Hi! Solid plan! Thanks for watching!!-k
Thanks for this video! Your content has been so helpful to me.
About that part where to make sure that overpayments apply to the principal… I have Nelnet and there’s usually a check box that says “Do not advance my payment more than a month” or something like that. Is that similar to your Mohela example? Should I check that checkbox to make sure additional payments go to the principal?
Hi @Biaaamac - Yes, you'd want to choose the "do not advance my payment" option.
This said, after some digging into individual experiences, I may refilm this to explain this important point:
**Depending on your loan servicer/experience, you may need to break up your payment so that your required payment hits, then the gov covers the interest not paid, then you send in more money which will go to the principal.**
It seems like there is a lot of variation on people's experiences, so some trial and error may be needed to make this work.
Thanks for watching and good luck! -k
@@themoneylibrarian ah that’s a great point, thanks for your reply! I’ll keep an eye out for your updated video in case you decide to refilm it :) Should you need any real life examples to use I’d be happy to share my real numbers with you 😅🤣
@@BiaaamacHi! Thank you so much - I would love to hear about your personal experience and see how it shakes out!! Cheers -k
Mohela is evil. I tried to pay principal only payments but they will not. Payments must pay any interest first and then the remainder will go towards principal. I argued with them and this is just how it is. My workaround to this is to pay extra the same day a payment is due because then the interest was already paid.
Hi! You'll get no argument from me on the evil front. Unfortunately all repayment plans will pay interest first 😢
Unfortunately, due to some of the servicers processing methods, if you're on SAVE, it looks like it's best to wait until the government covers the remainder of the interest and then pay extra which will go to the principal. I made a note of this update from the vid in the description.
Good luck and thanks for watching! -k
I am on the SAVE plan and I am required to pay $0.00 but my accrued interest is going up. It doesn't appear that the government is paying anything. It doesn't seem like it is benefiting me so far. I am confused what to do.
Hi! I think there’s been some issues with the rollout. Unfortunately I’ve heard a few people mention this one - I’d call your loan servicer and ask them what’s going on. Take good notes! Chances are, they’re just waiting on the payment.
Once their payments come through regularly, you can try this method of overpaying before the next billing cycle.
Thanks for watching and good luck! -k
Question: if you make a larger payment than required every month, does the additional money cover all the accrued interest for that month first, then the rest goes to principal? Or does the government cover all the interest for that month if your required payment is zero?
Thank you very much
Hi @zizosadventures6621 - I put an update in the description on this and will make another vid too.
Yes, the government will cover ALL the interest accrued that month if your payment is zero.
However, how the rules were written vs how they are playing out are two different things!There have been issues with the servicers not applying the gov subsidy to interest in a timely manner, so people's overpayments have been going to interest (which it shouldn't)
What people seem to be having luck with is sending in their required payment, then waiting for the government's interest payment to clear, THEN they send in their extra payment so it all goes to the principal.
You'll have to play it by ear, watch your account, and send in any EXTRA payments after the government covers the interest.
Thanks for watching! -k
Thanks for watching! Are you already on the SAVE plan? Do you plan to use this method to save money on interest and perhaps take years off your loans? Let me know in the comments! Thanks for watching! -k
I appreciate you ! My spouse just started the save PSLF plan. I think this is an awesome program.
@shanehess8950 that’s wonderful!! Thanks for watching! -k
You are doing the Lord's work here on YT! Don't care about the numbers.
Hi @ryanprasad2090 - I'm trying to do good work! Thank you for watching and supporting my channel!! 🥳🥳🥳 -k
Just subscribed! In your opinion, I have an option for a zero payment with save and a 70 per month option with PAYE. I’m having a hard time thinking this would be a good option knowing that in a year and a half I would need to pay income taxes on the forgiveness. Which would be north of 50k that I owe. It definitely helps right now but…do you think short term loan forgiveness or small payments out weigh longer term income tax hits? Like change my payment plan to a standard plan or plan without any forgiveness after January of 2026? Or should I use the save at a 0 per month rate and just pay towards the principal for this year or until 2026 when the income tax kicks in?
Hi! Ultimately you just have to work out the numbers and consider what you expect the next few years to bring.
Can you give me some more info? Is the forgiveness timeframe the same with both plans? Do you mean you’d owe >$50k in taxes on the forgiven balance or that they would forgive $50k?
In general, what I think is that paying a percent of your loans (in taxes) vs paying the entirety of your loans is probably the better move. If you’re worried about taxes, setting aside money into a high yield savings account monthly while you wait out the forgiveness duration will help a lot with the tax bill; plus, you can work out a payment plan with the IRS if/when that hits.
With a year and a half before you get forgiveness and then (as I understand it) a year to pay your tax bill, that would give you 2.5 years to pay off a percentage of your current student loan balance.
You may want to watch this vid that breaks down the four IDR plans to get clear on the pros/cons of each: czcams.com/video/Rz38mIVocoA/video.htmlsi=PywdzFBWEzeuPMc6
Hope this helps and thanks for watching! -k
@@themoneylibrarian I appreciate you getting back to me! If I were to do the save plan they would forgive 57k which is the total amount I owe. But, the pay off date would be 2038 and the monthly payments would be 0.
If I went with the Paye it would make my payments 70 per month but the forgiveness amount would be 78k and the payoff date would be 2042. Sorry math was not my major. But, it feels like if I do the save I obviously pay nothing(at least for now) and my forgiveness amount stays the same, but then I have to worry about the income taxes in 2026 if they don’t extend that law. Which makes me wonder would I pay more in taxes over that time (if still qualify for this every year after 2026) before the payoff date or should I just start making payments even while I’m at a 0 monthly payment if I go with the save? Sorry if this is too much! But I appreciate your input!
Hi! Every year you re-certify your income and household size which will change your monthly required payment - you can’t depend on having these exact payments for decades.
Based on the data we have now, here’s how I see it : If you had to pay $10k in taxes in 14 years, you’d need to save about $60 a month to cover that bill. You save the money and pay $0 on SAVE instead of the PAYE payment. Again, the required monthly payment will be updated yearly but we only have this data right now.
If at some point your income makes the standard payment less than the SAVE payment, you could use your savings to help cover the new, higher payment.
You know more about your situation than I do, only you can decide what’s best for you.
Thanks for watching! -k
@@themoneylibrarian Your insight is very informative and helpful! I wanted to get some more information and outside insight as well to help me make an educated decision! I appreciate all of your help and I will continue to watch/share your content!
Please don't forget, the loan amount to be forgiven is taxable, I believe (unless it's forgiven under PSLF). This could prove to be significant hit if the amount is substantial. Seems as though the government has their teeth in you in one way or another.
Hi @wookieecantina - first off, great name! No forgiveness given through 2025 is taxable but some will be after then. I made a short all about this topic, would love your thoughts: czcams.com/users/shortsJ3BpSo-1fs4?feature=share
Thanks for watching!-k
@@themoneylibrarian Kate, you’re awesome! Watched your tax implication video, it’s very helpful.
As a parent plus borrow, working on completing the double loop-hole consolidation, in an attempt to qualify for S.A.V.E, the goal of paying off the amount before 2025 is not possible. Yeah, it’s a large amount. Large like scary large. Ha! But the journey of a 1000 miles begins with a single step, therein, I’m thankful for the options.
Love your channel, keep up the great work.
Hi @wookieecantina - Thank you for your kind words, glad the tax video was helpful! Sounds like you got all your ducks in a row. Chances are the reduced required payments on your monthly payments on SAVE will be enough where, if you set some of it aside every month, you'll have more than enough to cover the tax bill if/when it comes. Good luck on the double consolidation, you got this!!! -k
I am on the zero payment plan right now, can I be making payments while on the zero payment plan?
Hi - if you’re on the SAVE plan, paying $0 a month, you can make payments - wait until you see the government paid the interest accrued and then send in money and make sure to mark it as an overpayment, not an early payment. Keep an eye on your account to see how the money is applied as you may need to make some adjustments.
If you aren’t on the SAVE plan you may want to log into studentaid.gov and see what income driven repayment options are open to you. If SAVE isn’t open, you may need to consolidate.
Thanks for watching! -k
Thanks for this video. UREGNT HELP: Please, please response to my question.
My Question:
Standard and SAVE which is an excellent choice for graduate student?
Secondly, does the interest accrue while in college?
Finally, does the interest accrue after graduating college?
Hi @anthonystephen - First off, if you can get through college, you can figure out your student loans - YOU GOT THIS!!!
To figure out which payment plan is best for your situation, I recommend my video here for all the payment plans: czcams.com/video/SfuPciHkT1k/video.html
Interest will accrue for unsubsidized loans while you're in school but you can pay it while in school to help keep your overall costs down, if you want. Here's a link that explains how it works: studentaid.gov/understand-aid/types/loans/subsidized-unsubsidized#subsidized-vs-unsubsidized
Interest will begin to accrue for all loans once you graduate.
I know student loans are scary and confusing, I recommend you go to your student aid office and speak to someone there who can answer all your questions.
Good luck and thanks for watching! -k
@@themoneylibrarian thanks for the quick response...I'm grateful
Like I said, you got this! And congrats on being in school, I hope you’re enjoying it! -k
so I'm single and owe back 23K in loans and I am on the save plan. My payments have been 0 dollars every month since last October. Wondering if there is anything else I can do to reduce my balance or will it be forgiven eventually? also great video :)
Hi @korsoupl6450 - it will be forgiven eventually (20 years for undergrad, 25 grad) but a lot can change in that time - including your required payment - and depending on your income and household size, you may or may not want to work to pay down the student loan. You may end up paying it off before the 20/25 year forgiveness timeline. 🧐
If, in a few years, you earn more, your payment on SAVE could be more than the payment on the standard plan, at which point you could either switch plans or go to the standard 10 year. Either way, you’d lose forgiveness as you’ll probably pay it off before the time required.
The method I discuss in the vid could be a great option for you as your required payment is $0, so ANYTHING you send in goes to the principal (again, you have to tell your servicer to put it to the principal). With all debt, the more you can take from the principal in the beginning, the greater the savings you’ll see over the years in repayment.
I’m unaware of other ways to reduce the balance but if I do hear of them, I’ll post it in a vid!
Hope this helps, thanks for watching! -k
@@themoneylibrarian thank you for the information! that might be my solution is to switch to a 10 year plan when my income increases! (hopefully this year) 25 years is a very long time in my case for the loan so I think doing it that way will be better! thank you so much
Great! If you’re expecting a big boost to your income then the SAVE method I talk about in this vid is perfect for you now while your required student loan payment is $0 - every dollar you send in can go to the principal instead of almost half going to the interest😳
Cheers! -k
So this is an interesting idea but it is basically double dipping. You are qualifying for a subsidy and then trying to pay down the principal at the same time. Even if you send in more money each month - chances are it will first go to all the interest you owe before anything goes towards the principal if you are enrolled in SAVE. Even if you ask for it to be applied towards the principal. It remains to be seen if this would work in practice. Anything over and above the monthly interest you owe would definitely go towards principal - but you may lose the subsidy. A better solution would be to put the overage in a high yield savings account and pay a lump sum after SAVE no longer is beneficial subsidy wise in your financial situation. But truthfully testing this theory out is the only way to see if it would actually work.
Hi! There have been issues with the government covering their part of the SAVE payments but hopefully that'll get ironed out as time goes on after the restart of student loans. Interesting idea to save in a HYSA instead of put it towards student loans! If someone is on the fence about paying down their loans or saving, this could work out well for them! Thanks for watching! -k
Yeah this was trick. After everyone switched, the court gutted all the good stuff, so now you are off IDR with no forgiveness and now have to pay interest.
Hi! Yes, the news changes so fast with student loans it can give you whiplash. I’ve been traveling the past couple weeks when the court case came though. Will do a video on the updates once I get my head around them.
Thanks for watching! -k