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Paying $0 Per Month On Your Federal Student Loans with IDR Plans Like SAVE

A zero-dollar monthly payment may seem like a scam, but it is a legitimate option for some federal student loan borrowers.

Written By: Michael P. Lux, Esq.

Last Updated:

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The burden of student loan payments can often feel insurmountable and confusing, leaving borrowers unsure of what solutions are available. However, amidst the maze of repayment options, there is one particular avenue that may initially sound too good to be true: $0 payments on income-driven repayment plans. This perk is available on ICR, IBR, PAYE, and the newly created SAVE plan.

Today, we will explore how these zero-dollar payments work, who qualifies for them, their advantages, disadvantages, and more.

Paying $0 Per Month on Your Student Loans

The idea of receiving a bill for zero dollars from your student loan servicer may raise eyebrows, but it’s a real option thanks to income-driven repayment plans. These plans determine the payment amount based on what borrowers can afford to pay, rather than their outstanding loan balance. While there are limitations, a $0 payment can be a beneficial choice for many borrowers.

How do I get a Zero Dollar Payment?

To begin, it’s important to note that a $0 payment is available only for federal student loans; private loans do not qualify. Eligible borrowers need to sign up for an income-driven repayment plan. IBR, PAYE, ICR, and SAVE all will work. These plans require payments ranging from 5 to 15% of a borrower’s discretionary income. If the government’s calculation determines that a borrower has no discretionary income, their monthly payment will be $0.

Payments on income-driven repayment plans are recalculated annually, adjusted for inflation and changes in income.

Sherpa Tip: This article treats all of the federal income-driven repayment plans similarly because qualifying for $0 payments and the pros and cons are all identical.

However, it’s worth noting that there are some important differences between these plans.

For starters, if you qualify for a $0 per month payment, REPAYE/SAVE and its generous interest subsidy is often the best choice.

$0 Student Loan Payments vs. Forbearances and Deferments

Qualifying for a $0 payment differs considerably from a forbearance or deferment.

While forbearances and deferments have time limits and usually do not last a year, there are no such restrictions on zero-dollar payments. Borrowers making $0 payments on income-driven repayment plans can continue to do so year after year.

Furthermore, $0 payments can count towards student loan forgiveness. Borrowers on income-driven plans can have their loans forgiven after 20-25 years, and those working in public service can use their $0 payments to qualify for the 120 payments required for public service loan forgiveness.

Downsides to Understand

Despite the benefit of not making monthly payments, it’s crucial to understand that the student loan interest does not vanish.

The loan balance increases with each passing month due to accruing interest. Borrowers should be aware of capitalized interest, where the additional interest is added to the loan balance, leading to interest being charged on the increased amount.

To avoid unnecessary capitalization of interest, borrowers should make sure not to miss any income certification deadlines.

Submitting $0 Monthly Payments

When borrowers have $0 payments, there is no need to send a check or complete additional paperwork each month.

However, for loans without a required payment, borrowers still must remember to certify their income before the lender-imposed deadline.

Are $0 payments too good to be true?

Given the prevalence of student loan scams and unreliable information from loan servicers, skepticism is natural when it comes to $0 payments on income-driven repayment plans like IBR, PAYE, and REPAYE/SAVE.

Fortunately, one of the advantages of federal student loans is the availability of income-driven repayment plans based on borrowers’ income rather than their loan balance.

If the Department of Education determines that a borrower cannot afford monthly payments, they will owe $0 per month. Even unemployed borrowers can be eligible for income-driven repayment plans, with most qualifying for $0 monthly payments. The Department of Education considers factors like family size and location to determine affordability, calculating payments based on the Adjusted Gross Income (AGI) reported on tax returns.

IDR Enrollment Process

While not every borrower can qualify for a $0 payment, anyone can apply for an income-driven repayment plan.

The process may take a few months to complete, but the initial paperwork can be filled out in approximately 10 minutes. Borrowers can apply through studentloans.gov or submit a paper application to their loan servicer.

Frequently Asked Questions

Are $0 payments available for private student loans?

No, $0 payments are only available for federal student loans.

Does the interest on student loans disappear with $0 payments?

It depends on the repayment plan selected. On IBR, PAYE, and ICR, interest will continue to accrue.

However, by enrolling in REPAYE/SAVE, borrowers get a subsidy that covers 100% of the unpaid interest each month.

Can I set up automatic payments for $0 each month?

No, there is no need to send checks or set up automatic payments for $0 payments. However, borrowers must remember to certify their income before the yearly deadline.

Can I switch from forbearance or deferment to a $0 payment plan?

Yes, by applying for an income-driven repayment plan, borrowers can transition from forbearance or deferment to $0 payments if eligible.

Final Thoughts

Understanding $0 payments on income-driven repayment plans can help borrowers make informed decisions about managing their student loan debt.

While the concept may seem too good to be true, it is a legitimate option for eligible borrowers with federal student loans. By taking advantage of income-driven repayment plans, borrowers can benefit from affordable payments, loan forgiveness opportunities, and a path toward financial stability.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

77 thoughts on “Paying $0 Per Month On Your Federal Student Loans with IDR Plans Like SAVE”

  1. thanks again. and honestly I am being a putz. only $26.63 to pay? plus I am going to let it get to 20 years and write off. I am at year 8 now. my income will likely stay the same as it is my IRA distribution of $3000 per year. You had already confirmed that my original loans, based on TOTAL of all loans, which was more than $12K, won’t get that special write off. And I’m 68 and have sufficient to live on (unless a future administration screws with Medicare and SS) so I will quit complaining!

    • Don’t feel bad about being confused on this stuff. It is a constantly moving target between the policy changes and court cases.

      One thing to add is that the 12k total for loan forgiveness cap applies to the 10-year early forgiveness on SAVE. However, for each additional thousand you borrow, it adds one year. For example, if you borrowed 14k, you could have your loans forgiven after 12 years. This article explains how that all works. The one thing to keep in mind is that there is a lawsuit currently pending that may put a stop to the early forgiveness option on SAVE.

  2. ok, still not sure. so: if I have a zero payment due, I should also have a zero interest payment due. since Mohela has been charging me a payment BUT it showed on their old site that it applied to interest (I couldn’t get a copy to show you since old platform is morbid). But when I originally went on SAVE, they calculated me at $388.85 based on previous year’s earnings. But I had retired. So I guess $26.63 is a great deal. I just expected to see it in the payment field not the interest field. After the July changes go thru (since it appears the courts will allow parts o.f it), I’ll see what happens and then call Mohela and ask about it. Thank you again.

    • Just to be clear, a $0 payment means you don’t pay anything, and it also means it isn’t advisable to pay extra.

      If your monthly payment is an amount other than zero, things change. For example, if your monthly bill is $26.63, it is entirely possible that amount only covers interest and the subisdy is covering the remaining amount.

      If you have a $0 payment on SAVE, you don’t need to worry about interest. Your balance should not increase. The only thing to be aware of is the fact that there is a bit of a delay for the subsidy to be credited to your account.

  3. Hi, so my Mohela is transferred. That all went well. They put me in deferral for July to allow for the transfer but pick up auto deduct in August. But I am a bit confused. I have a -0- payment due to income. But, I am getting a $26.53 interest bill, which I pay. Yes one of my loans did have unsubsidized interest. If I have a zero payment due, should the interest also be -0-? I want to call Mohela but want to make sure I ‘know’ what I am talking about since I see so many people say they get conflicting answers. BTW, everything you have told me in last two years has been correct.

    • I’m glad you’ve found this site to be a helpful resource over the years!

      The tricky part with the SAVE subsidy is that it doesn’t get applied right away. So borrowers get charged the interest, but then they get a credit in the amount of the “excess” interest. For borrowers with $0 payments, that means 100% of the interest.

      As long as you are on SAVE, you shouldn’t have to make any interest payments. Before you call, you might want to check out this article about the SAVE subsidy and payment processing.


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