WASHINGTON, D.C. — The U.S. Department of Education announced last week it will resume charging interest on federal student loans enrolled in the Saving on a Valuable Education (SAVE) Plan beginning August 1, 2025. This decision comes in response to a federal court injunction blocking implementation of the Biden Administration’s SAVE Plan, which had temporarily set borrowers’ interest rates to zero.
The Department emphasized that it lacks authority outside the enjoined SAVE Plan to maintain zero percent interest. The change will affect nearly 7.7 million borrowers, who will now need to transition to legal repayment plans to continue making progress toward loan forgiveness and other benefits.
“For years, the Biden Administration used so-called ‘loan forgiveness’ promises to win votes, but federal courts repeatedly ruled those actions unlawful,” said U.S. Secretary of Education Linda McMahon. She urged SAVE borrowers to shift to plans such as the Income-Based Repayment Plan, emphasizing that doing so is necessary to resume qualifying payments and access Congressionally authorized loan discharge programs.
The SAVE Plan, introduced after the Supreme Court’s 2023 decision in Biden v. Nebraska, aimed to provide broad relief through reduced payments and interest waivers. However, multiple court rulings in 2024 and 2025 declared key aspects of the plan unlawful. As a result, the Department placed impacted loans into forbearance with zero percent interest, which will now end.
Starting August 1, borrowers will see their balances accrue interest again. Once forbearance concludes, they will be responsible for both interest and principal payments. The Department advises borrowers to use its Loan Simulator to evaluate repayment options and select a plan that aligns with their financial goals.
The Department is also encouraging borrowers to apply for income-driven repayment (IDR) plans. By authorizing the Department to access tax information directly from the IRS, borrowers can expedite application processing and benefit from automatic annual income recertification.
Additionally, President Trump recently signed the One Big Beautiful Bill Act on July 4, which introduces a new income-based Repayment Assistance Plan expected to launch by July 2026. Given legal challenges affecting other plans, including PAYE and ICR, officials recommend SAVE borrowers consider the Income-Based Repayment Plan until the new option becomes available.
The Department has also resumed collections on defaulted loans after a five-year pause, gathering $282 million as of late June through voluntary payments and Treasury offsets. Administrative wage garnishments are expected to begin later this summer, although federal benefits such as Social Security payments have not yet been withheld.
Borrowers are being encouraged to act promptly to avoid unexpected interest charges and ensure continued progress toward repayment.
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