Thanks to yet another change to the student loan process, some borrowers may find that their current repayment plan is leading to a major headache. After months of uncertainty, one of the popular income-based repayment plans (SAVE) is no longer giving borrowers a financial break. Though payments are still paused, interest will begin to accrue again later this summer. Keep reading to learn more about what to expect for interest on the SAVE plan for student loans, what this means for borrowers and other future changes to repayment plans. 

What is the SAVE plan for student loans?

In 2023, the Biden administration introduced the Saving on a Valuable Education (SAVE) plan for student loans via an executive order. It was created to allow borrowers the option to pay back their loans with lower repayments based on income, and some people even had their loans completely forgiven as part of the plan.

In February, a federal appeals court blocked the U.S. Department of Education from implementing the plan. Since the ruling, those borrowers under the SAVE plan have remained in forbearance. Forbearance means there is a temporary pause or reduction in student loan payments for a set period. Most of the time, it is due to financial hardship, but administrative policies can lead to a payment pause, too.

As part of this forbearance, the impacted group of borrowers has not had interest accruing on their loans. They also were told they would not have to make any payments until September 2025, with some initial discussion suggesting an even later date of summer 2026. 

Now, however, the interest-free portion of the forbearance has quickly come to an end.  

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Why interest is returning for SAVE plan borrowers

After many months of the repayment plan’s future in question, Trump Administration officials have said that the interest will begin accruing on August 1, 2025. Though payments are still not required, the return of interest rates means that debt will continue to climb for borrowers under the SAVE plan. 

The Student Borrower Protection Center estimates that this could be $300 a month in just interest for the typical borrower, reports Forbes. For others, the number may be even higher.

The decision to have interest on SAVE plan student loans resume again was due to the court ruling earlier this month. 

“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,” a press release from the ED reads. “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.”

In order to comply with the court’s decision, the department is restarting interest accrual as soon as possible until impacted borrowers are switched to a new plan. 

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Why you might want to start repaying your loan

If you are enrolled in the SAVE plan, you are still not expected to begin making payments as the forbearance remains in effect. However, with interest resuming on August 1, holding off on repaying your loan could hurt you in the long run. 

The reason: Your balance could grow even higher while you wait for the lawsuit to finish. Then, when forbearance ends, you’ll be left with higher loans and higher monthly payments as a result. 

To help avoid this, the Department of Education has said it will begin reaching out to the more than 7 million people who are enrolled in the SAVE plan and instead help them make the transition to a new and legal repayment plan. 

These borrowers will likely move on to one of the other income-driven (IDR) payment plans to begin making qualifying payments. There are currently three options available: Income-Based Repayment, Pay As You Earn and Income-Contingent Repayment plans. These allow you to make lower monthly payments based on your current income and family size.

For more information about IDR plans, visit the Federal Student Aid website. 

What’s next for student loan repayment plans

The SAVE plan isn’t the only student loan repayment option that will eventually be phased out. As part of the Big Beautiful Bill that was recently signed into law, there will be major changes made to the student loan system.

One of the modifications involves the elimination of all income-based repayments. Borrowers will then be left with only two options:

1. Standard Repayment Plan. This option means people will be repaying their loans via fixed monthly payments over a fixed 10-25-year period based on the amount borrowed.
2. Repayment Assistance Plan. Like the income-based plans, borrowers would be expected to make payments based on their total adjusted gross income, ranging from 1 to 10 percent. Any unpaid interest that isn’t covered by the monthly payment will be waived.

However, it’s expected that the new student loan repayment plans won’t go into effect until July 2026. In the meantime, SAVE plan borrowers will have to work with the current plans available.