Education Department restarts interest accrual for borrowers on SAVE plan

(The Hill) — The Education Department announced Wednesday that interest accrual for student loan borrowers on the Saving on Valuable Education (SAVE) plan will restart Aug. 1.  

The SAVE plan, created under the Biden administration, was struck down as illegal by the 8th U.S. Circuit Court of Appeals. 

Since the ruling, millions of borrowers have remained in forbearance with no interest accrual, with the possibility this forbearance could last until summer 2026 before borrowers were forced to switch out.  

"Millions of borrowers enrolled in the Biden Administration’s SAVE Plan based on the false promise of loan cancellation and zero monthly payments, despite multiple federal courts striking down such policies. The Biden Administration also invented a zero percent ‘litigation forbearance,’ forcing taxpayers to foot the bill and leaving borrowers without clear direction on how to legally repay their loans,” the press release from the department states.  

The SAVE plan became a popular option for its ability to offer some borrowers monthly payments as low as $0.  

While borrowers will not be responsible for making payments on the SAVE plan until forbearance ends, their balance will rise with the restart of interest accrual.  

The Education Department is urging these borrowers to choose a new repayment plan before restarting payments. 

In the “big, beautiful bill,” congressional Republicans eliminated SAVE and other repayment options, leaving borrowers with only two plans: a standard repayment plan and a new Repayment Assistance Plan. Borrowers will have to switch to one of these plans by 2028.  

“For years, the Biden Administration used so-called ‘loan forgiveness’ promises to win votes, but federal courts repeatedly ruled that those actions were unlawful. 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 Secretary of Education Linda McMahon.  

“Since day one of the Trump Administration, we’ve focused on strengthening the student loan portfolio and simplifying repayment to better serve borrowers. As part of this effort, 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. Borrowers in SAVE cannot access important loan benefits and cannot make progress toward loan discharge programs authorized by Congress,” she added.