Almost 8 million federal student loan borrowers who enrolled in a Biden-era repayment program will soon see interest accruing on their debt again, even as their payments are paused due to an ongoing legal battle.
Starting Aug. 1, interest will begin accruing on loans that are currently enrolled in the Saving on a Valuable Education, or SAVE, repayment plan, the Education Department announced Wednesday. Some 7.7 million borrowers are enrolled in the plan, which was created under the Biden administration in 2023 and faced immediate backlash from conservatives.
In fact, the future of the SAVE repayment plan has been in legal limbo for months, following a lawsuit brought by seven Republican-led states. While the lawsuit plays out, borrowers enrolled in the plan have not had to make payments, and interest has not accrued. Now, interest will restart, though enrolled borrowers still do not need to make payments, the Education Department says. That means their balance could grow as they wait for the lawsuit to play out—and when forbearance ends, borrowers will be need to make monthly payments on the new, higher loan totals.
The Student Borrower Protection Center, a student loan advocacy group, estimates this will cost the typical borrower $3,500 per year, or $300 per month, in interest payments.
The SAVE plan allowed some low-income borrowers to pay $0 per month on their loans. Debts could be forgiven after 25 years in repayment, even if that monthly payment never increased.
But the Trump administration is taking a significantly different approach to federal student loans than his predecessor. Blanket forgiveness—a cornerstone of the Biden approach—is off the table.
“Congress designed these programs to ensure that borrowers repay their loans, yet the Biden Administration tried to illegally force taxpayers to foot the bill instead,” said U.S. Education Secretary Linda McMahon.
The Education Department is encouraging SAVE borrowers to enroll in a different repayment plan. It says it will begin reaching out to affected borrowers.
In addition to restarting interest accrual, the Education Department resumed collections on overdue loans in May. It has received nearly $282 million in collections on defaulted federal student loans as of late June, according to a press release. It says it expects wage garnishment efforts to begin later this summer.
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