Student Loan Interest to Resume for 8 Million SAVE Borrowers

The Trump administration’s Department of Education is making moves to guide millions of borrowers who are currently in a legal gray area back into repayment. The department recently announced that interest on federal student loans will resume accruing on August 1 for approximately 8 million borrowers enrolled in the stalled Saving on a Valuable Education (SAVE) repayment program, which was initially implemented by the Biden administration.

According to Secretary of Education Linda McMahon, all borrowers in the SAVE plan are encouraged to swiftly transition to a repayment plan that complies with the law. This decision comes after a federal court injunction halted the SAVE plan in July 2024, citing the need for congressional approval. As a result, borrowers in the program were placed in forbearance, with payments paused and interest accrual frozen while the legal proceedings unfolded.

Now, the Education Department under President Donald Trump is pushing for these borrowers to resume making payments on their student loans, restarting interest accrual as an incentive. The department’s goal is for borrowers to switch to a legally compliant repayment plan before the newly enacted One Big Beautiful Bill Act takes effect. This law mandates that many borrowers transition from older plans, including SAVE, to one of three specified repayment plans by July 2028.

Although there is no set end date for the forbearance period, borrowers in the SAVE program will eventually be required to switch plans. Betsy Mayotte, founder of the student loan advice nonprofit TISLA, speculates that the forbearance may last until the Repayment Assistance Plan (RAP) officially launches in July 2026. However, the Education Department has not confirmed this timeline.

Financial planner Tyler Olson advises borrowers to carefully consider their options during this uncertain period. While staying on SAVE may be beneficial for some, particularly those close to meeting the requirements for Public Service Loan Forgiveness (PSLF), most borrowers should begin exploring other repayment options.

One popular alternative to SAVE is the Income-Based Repayment (IBR) plan, which pegs monthly payments to a percentage of discretionary income and offers loan forgiveness after a certain number of years. However, the benefits of IBR vary depending on when the loans were taken out. Borrowers may also consider the Pay As You Earn (PAYE) program, which has a less stringent financial hardship requirement.

Ultimately, borrowers are encouraged to switch to a new repayment plan to avoid further interest accrual and take control of their path to loan forgiveness. By making informed decisions now, borrowers can navigate the changing landscape of student loan repayment and secure their financial future.