Why Biden's new SAVE student loan income-driven plan is a game changer For many student-loan borrowers, interest capitalization has been the bane of their existence. It's why loans that might have been reasonably affordable become financially debilitating after years of deferment or forbearance. Balances balloon when a borrower's monthly loan payments do not cover the interest because it's tacked onto the principal. Interest is then applied to the new, larger loan amount. This is how the debt grows over time and can make the monthly payment unmanageable. But under a new income-driven repayment plan — the Saving on a Valuable Education (SAVE) Plan — borrowers won't see their balances grow even if their payments don't cover the interest they owe. This could be a game changer for folks who would otherwise be trapped in loan payments for decades. Like other income-driven repayment plans, SAVE calculates monthly payments based on a borrower's income and family size. It is now the most affordable repayment plan, according to the Education Department. There are many great features of SAVE — some that were implemented this summer and others that begin July 1, 2024. But the one about interest capitalization in effect now is significant. To read more about how interest works on a SAVE plan, click the link below. Talkback This week, I shared the anxiety of spending down retirement savings after years of being a disciplined saver. Read: My husband just retired. I'm scared to death of running out of money. Here's what readers had to say in the comment section. (Some comments have been edited for clarity and style.) There's some great perspective and advice. GLH2 wrote: "I worry about my retirement income, and I have pensions and dividends. It's just that after saving for so many years, you worry about the future, which I understand is really ridiculous in my case, but I still worry." kousadog wrote: "Congratulations on your good planning, good execution and good fortune. Now chillax!! And get yourself one of those fancy drinks with the little umbrellas in them." Indian Queen wrote: "Stop worrying and enjoy your retirement, you earned it. If you paid off your house, don't have credit card debt, and a car payment, you can relax. We retired more than 17 years ago and have more than enough money to cover our expenses for the rest of our lives. Like you, we worried about our finances when we first retired, and we shouldn't have. Your husband is right — your kids will be happy to spend anything that you don't. As I often say, 'Either I fly first class, or my kids will fly first class.' Guess which one I choose." john-vt wrote: "All this does — aside from humble bragging — is scare people who aren't as fortunate. Aside from the people who haven't been able to save at all, many of us HAVE been saving, but we are nowhere near as lucky as her and her husband." Money News This Week As cost of climate disasters grows, some investors profit with catastrophe bonds Biden administration names 10 prescription drugs for price negotiations Years of IRS inaction leave workers vulnerable to shady tax preparers The best time to buy Christmas flights, according to Google Feedback Last week, I wrote about the rise in 401(k) millionaires. I ask folks in the millionaire club: What advice would you give young adults to achieve the same status? Here's what some readers suggested: Vince from Deerfield Beach, Fla., wrote: "Consistency: Max out all matching retirement funds and stick with it." Jeff from Jefferson City, Mo., offered the following advice: Live simply. "I bought a modest house for my family and have lived there for 30 years. I've bought basic, reliable cars and driven them until they died. I buy what I need, and I buy store brands. Plus a couple hundred dollars a month for fun." Invest automatically. "I've maxed out IRAs for my wife and me each year, and I've invested in my agency's deferred compensation plan to receive deferred-tax growth and the company match. All automatically taken out of my paycheck; I don't even have to think about it." Leave it alone. "I've invested in a variety of growth mutual funds with low expenses. I don't try to pick stocks, I don't shift between funds, I don't try to 'buy low and sell high.' Just let it ride and watch it grow over time. I just turned 60. Because of my habits, I can retire whenever I want and do whatever I want. What freedom!" If you have a personal finance question, call 1-855-ASK-POST (1-855-275-7678). Send your comments and questions to colorofmoney@washpost.com, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated. | 
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