Student Loan Borrowers Face Changes to the SAVE Plan
The U.S. Department of Education has announced that interest accrual for student loan borrowers enrolled in the Saving on Valuable Education (SAVE) plan will resume starting August 1. This decision marks a significant shift for millions of borrowers who have been in forbearance since the plan was deemed unlawful by the 8th U.S. Circuit Court of Appeals.
The SAVE plan, introduced under the Biden administration, was designed to offer borrowers more affordable repayment options, including the possibility of $0 monthly payments for some individuals. However, the court’s ruling led to the plan being invalidated, leaving many borrowers in a state of uncertainty. During this time, no interest was being charged on their loans, and there was speculation that this forbearance could continue until summer 2026.
According to a statement from the Department of Education, the SAVE plan was based on promises of loan cancellation and zero payments, which were later challenged in multiple federal courts. The department also highlighted the creation of a “zero percent litigation forbearance,” which placed a financial burden on taxpayers while offering borrowers unclear guidance on how to legally repay their loans.
Although borrowers are not required to make payments during the current forbearance period, the restart of interest accrual means their loan balances will increase. The Department is urging these borrowers to explore new repayment plans before they are required to start making payments again.
In a broader legislative move, congressional Republicans eliminated the SAVE plan and other repayment options as part of the “big, beautiful bill.” As a result, borrowers are now limited to two repayment plans: a standard repayment plan and a newly introduced Repayment Assistance Plan. These changes require borrowers to transition to one of these plans by 2028.
Secretary of Education Linda McMahon emphasized the importance of ensuring that borrowers can legally repay their loans. She stated that the Biden administration had used misleading “loan forgiveness” promises to gain political support, but these actions were ultimately found to be unlawful. Congress, she noted, designed repayment programs to ensure that borrowers fulfill their obligations, rather than placing the burden on taxpayers.
Since the Trump administration took office, the focus has been on strengthening the student loan portfolio and simplifying repayment processes to better serve borrowers. As part of this effort, the Department is encouraging all borrowers currently enrolled in the SAVE plan to transition to a legally compliant repayment option, such as the Income-Based Repayment Plan.
Borrowers enrolled in the SAVE plan are unable to access certain loan benefits or make progress toward loan discharge programs authorized by Congress. Therefore, it is crucial for them to take action and choose a new repayment plan before the deadline.
With the changes to the repayment landscape, borrowers must remain informed and proactive in managing their student loans. The Department of Education continues to provide resources and guidance to help borrowers navigate these transitions and ensure they are on the right path to repaying their debts.
