Restarted student loan interest for SAVE plan borrowers brings feelings of crushing burden to some
Student Loan Borrowers Face Renewed Interest Accrual Under SAVE Plan
The special benefits of the SAVE plan for student borrowers, which was launched in 2023, have been put on hold due to federal court rulings. Interest on loans for SAVE enrollees will resume accruing starting August 1, 2025, but borrowers are not yet required to start payments due to an ongoing administrative forbearance.
The SAVE plan was designed to reduce monthly payments based on income and family size, prevent interest from ballooning, and accelerate loan forgiveness for some low-income borrowers. However, multiple federal courts, including the 8th Circuit Court of Appeals, ruled the SAVE plan unlawful in 2024 and 2025, leading to injunctions blocking the plan’s implementation.
As a result, about 7.7 to 8 million borrowers enrolled in SAVE have been in a legal forbearance with zero interest accrual since July 2024. The Department of Education announced that interest accrual will resume for these borrowers starting August 1, 2025, to comply with the court injunctions. However, the repayment pause remains for now, meaning payments are not yet due.
Experts encourage SAVE plan borrowers to be proactive in understanding their options and considering if another plan may be better. The Trump administration has announced it will support borrowers in selecting new repayment plans that are legally compliant and sustainable, moving away from the now-blocked SAVE plan.
The changes to SAVE have caused concern among student loan experts, who fear that the confusion may lead to more financial difficulties for borrowers. Roxanne Garza, director of higher education at EdTrust, stated that SAVE faced legal challenges from the start. She warns that it could take a long time to get clarity from the Department of Education regarding the application process and switching to a different plan.
Andrea Murzello, a doctorate in pharmacy with a stable job at a nonprofit, is one of the many borrowers affected by the changes to SAVE. Before switching to the SAVE plan, her monthly student loan payments were around $1,000. However, she was able to switch to the SAVE plan in 2023, which reduced her monthly payments to about $400. As a result of the court decision, SAVE borrowers were placed in no-interest forbearance, with payments paused and balances frozen since last summer. However, with the resumption of interest accrual, Murzello and her husband are postponing plans for a second child due to the changes in the SAVE plan.
The Association of American Medical Colleges expects a deficit of up to 40,400 primary care physicians by 2036, partially due to the steep cost of medical education. The cost of student loans can be a significant barrier for many individuals pursuing careers in healthcare, and the changes to the SAVE plan may exacerbate this issue.
In conclusion, SAVE plan borrowers face renewed interest accrual on August 1, 2025, increasing their loan balances, while monthly payments remain paused temporarily due to administrative forbearance. They are encouraged to transition off SAVE to avoid unexpected costs and establish a new, lawful repayment plan. The Department of Education has a backlog of approximately 1.5 million applications from borrowers seeking to switch into different income-driven repayment plans, so it is important for borrowers to be proactive in understanding their options and taking action.
- The resumption of interest accrual on the SAVE plan, due to take effect on August 1, 2025, may have implications for borrowers not only in regards to education-and-self-development but also in their broader finance management.
- The changes in the SAVE plan, with renewed interest accrual and pending repayments, could potentially impact not just politics and general-news but also the overall economic landscape, particularly in sectors like healthcare where the cost of education is high and workforce shortage is anticipated.
