HOUSTON – Starting Aug. 1, interest will resume on federal student loans for millions of borrowers enrolled in the now-blocked SAVE repayment plan.
“Every single individual loan is already increasing my balance,” said borrower Taelor Beal. “It’s just very inconsistent, we’re back and forth.”
The student isn’t a part of the SAVE plan but tried applying to the Biden-era plan. Beal has roughly $75,000 in student loan debt. She recently checked her accounts and noticed interest rates applied to her loans.
The U.S. Department of Education estimates that:
- 42.7 million Americans hold student loan debt,
- Together, they owe more than $1.6 trillion, and
- Of those borrowers, 7.7 million are enrolled in the SAVE plan. They face rising interest unless they act.
What Happened to SAVE?
The SAVE (Saving on a Valuable Education) plan was created under the Biden administration to reduce monthly payments, often to $0, based on income. In July 2024, the plan was put into forbearance with 0% interest after an appeals court blocked it.
Now, that temporary freeze is expiring. Borrowers in SAVE will begin accruing interest on Aug. 1, even though official payment due dates have not yet resumed.
The Department of Education is now strongly encouraging borrowers to switch to another repayment plan.
“The Department urges all borrowers in the SAVE Plan to quickly transition to a legally compliant repayment plan such as the Income-Based Repayment Plan,” said Secretary of Education Linda McMahon in a press release. Borrowers in SAVE cannot access important loan benefits and cannot make progress toward loan discharge programs authorized by Congress.”
As the department phases out the SAVE plan, and others like ‘Pay As You Earn’ and ‘Income-Contingent Repayment’ are being phased out, Income-Based Repayment (IBR) is currently the only income-driven repayment option available, Department of Education spokesperson tells KPRC 2.
Borrowers can switch plans using the Income-Based Repayment Plan Request Form at StudentAid.gov.
However, the Department began processing these forms on May 10, 2025, and now faces a backlog. Borrowers will be placed in a 60-day forbearance while waiting, and a general forbearance if the delay extends further.
A new repayment option, the Repayment Assistance Plan (RAP) will launch in July 2026. According to Paul Brace, the Rice University Emeritus Clarence Carter Chair in Legal Studies.
“It caps repayment at 1 to 10 percent of income, includes a $10 minimum payment, and offers forgiveness after 30 years,” Brace said.
However, Brace also warns that repayment options are becoming more limited and less flexible.
“There are more restrictions on loans, there’s a lower ceiling on how much you can borrow, and the repayment plans have less flexibility in them going forward,” he said.
Beal, who is considering law school, says the uncertainty around federal student loan policy is frustrating.
“I feel bad for the people who were under the impression that their loans were going to be forgiven,” she said. “To now be expected to start back paying when you were promised you wouldn’t, it’s unfortunate, especially in this economy when we really don’t know where our money is coming or going.”
What Borrowers Should Do Now
Ben Montecillo, Financial Aid Director at the University of Houston, encourages borrowers to take action.
“You can see which payment plan would be the best fit for you. It may be one of the income-based repayment plans, or it may be the standard repayment plan,” he said.
Steps Borrowers Should Take:
- Log in to StudentAid.gov to check your loan status.
- Use the Loan Simulator to explore repayment options.
- Submit the IDR Plan Request Form to switch to IBR if you’re on SAVE.
- Monitor your account for processing updates and any changes to your loan status.
The Department of Education has notified affected borrowers directly. But with deadlines and policy changes happening fast, experts stress proactive steps are key to avoiding larger loan balances.
