The pause is officially over. Starting today, more than 8 million borrowers enrolled in the SAVE plan will once again see interest accrue on their student loans, marking the end of a relief period that began under the Biden administration.
The Education Department announced the move back on July 9, calling the return of interest a step toward “fiscal responsibility” in a statement on their site.
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“For years, the Biden Administration used so-called ‘loan forgiveness’ promises to win votes, but federal courts repeatedly ruled that those actions were unlawful,” said U.S. 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.”
The SAVE plan launched in 2023 and was designed to lower monthly payments based on a borrower’s income and family size. While payments are still not required, interest will now begin to accrue month to month. That change could mean an extra $300 a month for some.
Overhaul of the federal loan system
Meanwhile, lawmakers have pushed through a sweeping overhaul of the federal student loan system. On July 3, Congress passed President Donald Trump’s “big beautiful bill,” a massive spending package that eliminates existing income-driven repayment plans and replaces them with two options.
The legislation also:
- Places tighter limits on loans for graduate students and parents
- Restricts deferment options for those in financial distress
- And, starting July 1, 2028, cuts off federal aid to college programs whose graduates earn less than the median high school graduate in their state
What borrowers can do now
- Do nothing:
Not taking action will not hurt your credit score because payments still won’t be due. However, that balance will increase with the interest, which could make it more difficult to pay off your debt.
- Enroll in another plan:
With the standard repayment plan, your debt is paid off over a 10-year term by dividing your debt into fixed monthly payments. You can do the income-based repayment plan, which is the only current one available.
Affected by student loan debt
Student loan debt is delaying key milestones like homeownership, marriage and parenthood for 71% of borrowers, according to a Gallup-Lumina report. The impact is especially dire in medicine, where rising education costs are contributing to a projected shortfall of up to 40,400 primary care doctors by 2036, the Association of American Medical Colleges warns.
