- Trump's Education Department is restarting interest charged for student-loan borrowers enrolled in Biden's SAVE plan.
- Interest will start accruing again on August 1 after being paused for a year due to litigation.
- The department encouraged borrowers to switch to a different income-driven repayment plan.
Millions of student-loan borrowers are about to see their balances grow after a year on pause.
President Donald Trump's Department of Education announced on Wednesday that interest charges will restart on August 1 for student-loan borrowers enrolled in the SAVE repayment plan.
The department said that the interest restart is in compliance with a court order issued earlier this year that upheld the block on the SAVE plan. The order did not explicitly instruct the department to restart interest charges for enrolled borrowers.
"Since day one of the Trump Administration, we've focused on strengthening the student loan portfolio and simplifying repayment to better serve borrowers," Linda McMahon, Trump's education secretary, said in a statement.
"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," McMahon said. "Borrowers in SAVE cannot access important loan benefits and cannot make progress toward loan discharge programs authorized by Congress."
Created by former President Joe Biden, the SAVE plan allowed for cheaper monthly payments with a shorter timeline to loan forgiveness. The plan was quickly met with legal challenges and has been blocked in court since July 2024. Since then, the nearly 8 million enrolled borrowers have been on a forbearance during which they were not required to make monthly payments, and interest was not accruing.
The department said that on Thursday, it will begin outreach to enrolled SAVE borrowers with instructions on switching to a new repayment plan. When the forbearance ends, borrowers will be responsible for making their monthly payments, including accrued interest.
Switching to a new repayment plan, though, might still bring challenges to borrowers. The Department of Education wrote in a May 15 legal filing that, as of April 30, nearly 2 million borrowers' income-driven repayment applications were still pending. A department spokesperson told Business Insider at the time that the department hopes to clear the backlog "over the next few months."
The department added in its Wednesday press release that "borrowers switching from the SAVE Plan to another IDR plan can expect quick and timely processing."
Additionally, Trump's tax and spending bill, which he signed into law on July 4, limits borrowers' repayment options to two, which will be available to borrowers beginning July 1, 2026: a standard repayment plan and a new income-based Repayment Assistance Plan that sets borrowers' payments at 1% to 10% of their income.
Some borrower advocates criticized the department's decision to restart interest charges next month. Mike Pierce, executive director of the advocacy group Student Borrower Protection Center, said in a statement that "these are teachers, nurses, and retail workers who trusted the government's word, only to get sucker-punched by bills that will now cost them hundreds more every month."
Are you enrolled in the SAVE plan and have thoughts to share on the restart of interest charges? Reach out to this reporter at [email protected].
