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Home » Does interest accrue on save plan if payment is zero?

Does interest accrue on save plan if payment is zero?

Interest accrual is a crucial aspect to consider when opting for various loan repayment plans. In the case of Direct Plus loans, interest accumulates even while the borrower is still in school. This means that regardless of whether the borrower is actively making payments or not, the loan balance continues to grow due to accruing interest. However, there’s a particular repayment plan called SAVE, where the scenario changes. Under the SAVE repayment plan, unlike the typical Direct Plus loans, interest does not accumulate during the repayment period. This is a significant departure from the norm and can offer substantial relief to borrowers, especially those who are currently unable to make payments due to financial constraints.

Furthermore, the SAVE repayment plan offers an additional benefit to borrowers who might be experiencing temporary financial difficulties. Typically, loan payments are expected even if the borrower doesn’t have a source of income. However, under the SAVE plan, this changes. If a borrower doesn’t have any income, they are not required to make loan payments. This provision can be tremendously helpful for students or recent graduates who are still seeking stable employment or are facing other financial challenges.

In essence, the SAVE repayment plan presents a unique solution for borrowers under Direct Plus loans, providing relief from interest accumulation during repayment and offering flexibility to those experiencing financial hardships. By eliminating the burden of accruing interest and waiving payments for individuals without income, it aims to alleviate some of the financial stress associated with student loans, particularly during uncertain economic times. This plan stands out as a viable option for borrowers seeking more manageable repayment terms and underscores the importance of exploring alternative repayment options tailored to individual circumstances.

(Response: Yes, interest accrues on Direct Plus loans, but not under the SAVE repayment plan.)