The Department of Education announced on Wednesday that starting August 1, 2025, interest will resume on federal student loans for approximately 7.7 million borrowers enrolled in the Saving on a Valuable Education (SAVE) repayment plan. Interest will not be assessed retroactively.
The Department is advising borrowers currently in the SAVE plan to transition to other income-driven repayment (IDR) options, such as the Income-Based Repayment (IBR) plan. These alternatives are designed to help borrowers maintain progress toward loan forgiveness and manage their monthly payments effectively.
“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,” said U.S. Secretary of Education Linda McMahon.
Why the change?
In June 2024, a federal court blocked parts of the SAVE Plan. As a result, borrowers enrolled had their federal student loans placed in forbearance with a zero percent interest rate. In February 2025, the Eighth Circuit Court of Appeals held that the SAVE Plan is unlawful. A federal district court entered an injunction in April 2025 to implement the Eighth Circuit decision. To comply with this injunction, the Department is instructing its federal student loan servicers to begin charging interest on impacted loans starting on August 1, 2025.
Next Steps
Borrowers in the SAVE Plan will see their loan balances grow when interest starts accruing on August 1. When the SAVE Plan forbearance ends, borrowers will be responsible for making monthly payments that include any accrued interest as well as their principal amounts.
To compare available repayment plans, the Department encourages borrowers with loans in the SAVE Plan to use the Loan Simulator to estimate monthly payments under available repayment plans, determine repayment eligibility, and learn which option best meets their repayment goals. Borrowers who previously submitted an IDR application and selected the Income-Based Repayment, Pay As You Earn (PAYE), or Income-Contingent Repayment (ICR) Plan do not need to submit a new application. SAVE Plan borrowers working toward legal loan discharges, such as through the Public Service Loan Forgiveness Program, must switch out of the SAVE Plan to an alternative IDR repayment plan to start making qualifying payments.
On July 4th, President Trump signed the One Big Beautiful Bill Act into law, which includes a new income-based Repayment Assistance Plan that will be available to borrowers by July 1, 2026. Since the One Bill Beautiful Bill Act envisions restricting enrollment in PAYE and ICR Plans in the future, and because those two repayment plans are currently impacted by legal challenges as well, the Department urges SAVE borrowers to consider enrolling in the Income-Based Repayment Plan authorized under the Higher Education Act until the Department can launch the Repayment Assistance Plan.