One of the great parts of the SAVE subsidy is that it will fully cover your wife’s interest while she makes zero dollar payments.

In other words, there won’t be any interest charges to capitalize if she changes repayment plans. Her balance will be the same as what it was when she started on SAVE.

My wife’s student loans got approved on the SAVE plan in October with 0$ payments. Next year when we recertify our annual income, our combined income/tax filing status will push our payments on SAVE way above the Standard plans cost, so we are hoping to downgrade to the Standard 10 yr Repayment before then, and enjoy this first year of no payments. Do you know if switching from the SAVE plan to the Standard Plan will capitalize all the waived interest that occured in the first year on SAVE?

It really depends on the repayment plan you select. The new SAVE plan is probably the best bet for your situation. This is because of the subsidy that will cover your interest.

It only capitalizes when there is an event that triggers capitalization. You could go for years without the interest capitalizing, but if you change plans for example, the interest would capitalize.

You are correct Lindsey. For my student loans, I made the decision to switch to REPAYE knowing that it would cause an interest capitalization because it was worth it for me.

The one clarification I’d add is that the interest subsidy kicks in each month, not just at the 20-year forgiveness mark.

However, moving to Revised PAYE could make it worth it, correct? Given that half of the interest is forgiven at the 20-year forgiveness mark?

Hi Todd,

Unfortunately, changing repayment plans is something that will trigger capitalization.