Millions of Americans with federal student loans under the Saving on a Valuable Education (SAVE) plan are facing a new financial challenge. Starting August 1, 2025, the interest freeze that had temporarily shielded borrowers ended, and interest began accruing again on SAVE loans.
For many borrowers, this change could mean a significant increase in monthly payments, with experts estimating an average rise of around $300 per month, or nearly $3,500 annually.
Why Interest Resumed
The decision to restart interest on SAVE loans comes after a federal court ruling earlier this summer. The court declared aspects of the SAVE plan unlawful, effectively halting one of the key benefits that borrowers had relied upon: zero-interest forbearance.
According to the U.S. Department of Education, around 7.7 million borrowers had been placed in a special forbearance where they were not required to make payments and no interest accrued. As of August 1, that relief ended.
The Department clarified that while interest is resuming, it is not retroactive—meaning borrowers will not be charged interest for the months before August 2025.
How Much Could Payments Increase?
The Student Borrower Protection Center and other advocacy groups estimate that borrowers may see an average increase of $300 per month just from interest charges. Over the course of a year, that could add up to roughly $3,500 in additional costs.
This increase will vary depending on the size of a borrower’s loan balance, interest rate, and repayment plan. For example:
- A borrower with $50,000 in loans at 6% interest could see an additional $250–$280 per month.
- Someone with $75,000 in loans may face $350–$400 more per month.
The higher the loan balance, the sharper the impact of interest accrual.
Options for Borrowers
With interest now building again, borrowers face important decisions about how to manage their debt. Here are the main options available:
1. Switch to Another Income-Driven Repayment (IDR) Plan
Borrowers currently in SAVE forbearance can consider moving to other repayment plans like Income-Based Repayment (IBR), Pay As You Earn (PAYE), or Income-Contingent Repayment (ICR).
Each plan calculates payments as a percentage of income, potentially lowering monthly costs. The Federal Student Aid Loan Simulator can help borrowers compare repayment options and see how much they might pay each month.
2. Stay in SAVE Forbearance
Remaining in forbearance means no immediate payments are required, but interest will continue to accrue and balances will grow over time. Importantly, months spent in this forbearance do not count toward loan forgiveness programs like Public Service Loan Forgiveness (PSLF).
3. Prepare for the Repayment Assistance Plan (RAP) in 2026
A new Repayment Assistance Plan (RAP) is set to launch on July 1, 2026. Under RAP, borrowers will pay between 1–10% of their adjusted gross income (AGI), with a minimum of $10 per month. A $50 deduction per dependent will apply.
However, RAP may extend repayment terms to 30 years, compared to the 20–25 years offered under current IDR plans. This could result in higher long-term costs, especially for lower-income borrowers.
4. Consider Temporary Forbearance or Deferment
Borrowers experiencing financial hardship can also apply for other forms of forbearance or deferment. Information on these options is available on the Federal Student Aid website.
What Borrowers Should Watch Out For
- Loan Servicer Delays: Many borrowers have reported long wait times and delays when trying to switch repayment plans. Staying proactive and submitting requests early can help avoid complications.
- Forgiveness Tracking: Time spent in SAVE forbearance does not count toward PSLF or IDR forgiveness. Borrowers hoping for forgiveness should carefully consider switching plans sooner rather than later.
- Interest Growth: Even if no payments are due right now, balances will rise quickly as interest resumes. This could lead to “ballooning debt” if left unmanaged.
The Bigger Picture
The SAVE plan was originally launched as a replacement for REPAYE, with the goal of making repayment more manageable for millions of borrowers. Under President Biden, it promised lower monthly payments and forgiveness benefits.
However, with the recent court ruling, much of that relief has been put on hold, and the future of SAVE remains uncertain. The Department of Education has said it will continue to fight for borrowers, but until a legal resolution is reached, many are left in limbo.
Resources for Borrowers
Borrowers should rely on official government resources for accurate and updated information:
(FAQ,s)
1. Why did interest on SAVE loans resume on August 1, 2025?
A federal court ruled parts of the SAVE plan unlawful, forcing the Department of Education to end the zero-interest forbearance. Interest is now accruing again.
2. Will borrowers be charged retroactive interest?
No. The Department of Education confirmed that interest is not retroactive. Borrowers will only be charged interest from August 1, 2025, onward.
3. How much could my monthly payment increase?
On average, borrowers may see an increase of about $300 per month, or around $3,500 annually. The exact amount depends on your loan balance, interest rate, and repayment plan.
4. Does time in SAVE forbearance count toward PSLF or loan forgiveness?
No. Months spent in this special forbearance do not count toward Public Service Loan Forgiveness (PSLF) or income-driven repayment forgiveness.
5. What repayment options do I have now?
Borrowers can switch to other IDR plans like IBR, PAYE, or ICR, remain in SAVE forbearance, or prepare for the new Repayment Assistance Plan (RAP) launching in July 2026.
6. Where can I check how much my payments will be?
You can use the official Loan Simulator tool on the Federal Student Aid website to estimate payments under different plans.
Conclusion
The resumption of interest on SAVE loans marks a major shift for nearly 8 million borrowers. With average monthly costs set to rise by about $300, many will need to reevaluate their repayment strategies.
Borrowers are encouraged to review their repayment options, use official tools like the Loan Simulator, and keep track of policy updates from the U.S. Department of Education.
The coming months may be financially challenging, but staying informed and proactive will help borrowers manage this transition and prepare for future repayment changes.
Nand Kishor is a content writer covering business, economy, and world affairs. With a background in journalism, he focuses on clear, ethical, and insightful reporting. Outside of work, he enjoys chess, cricket, and writing short stories.