July 09th, 2025
Loans in SAVE Plan Will Begin Accruing Interest on August 1st, Borrowers in SAVE Urged to Act
The U.S. Department of Education will take an additional step to bring fiscal responsibility to the federal student loan portfolio by restarting interest accrual for borrowers with loans in the illegal Saving on a Valuable Education (SAVE) Plan on August 1, 2025. The Department will take this action to comply with a federal court injunction that has blocked implementation of the SAVE Plan, including the Department’s action to put SAVE borrowers in a zero percent interest rate status. The Department had the authority under the SAVE plan to prevent borrowers from going into negative amortization, which is the authority the Department relied on to put borrowers in zero percent interest rate status. Outside of that regulatory provision in SAVE (which is enjoined), the Department lacks the authority to put borrowers into a zero percent interest rate status.
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. 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.
The Trump Administration will support borrowers in selecting a new, legal repayment plan that best fits their needs and helps them get on a sustainable financial path while protecting American taxpayers. Tomorrow, the Department will begin direct outreach to the nearly 7.7 million borrowers enrolled in the SAVE Plan, with instructions on how to move to a legal repayment plan so borrowers can begin making qualifying payments.
“For years, the Biden Administration used so-called ‘loan forgiveness’ promises to win votes, but federal courts repeatedly ruled that those actions were unlawful. Congress designed these programs to ensure that borrowers repay their loans, yet the Biden Administration tried to illegally force taxpayers to foot the bill instead,” 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. 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.”
Just weeks after the Supreme Court ruled the Department cannot unilaterally waive federal student loans in Biden v. Nebraska, the Biden Administration announced the SAVE Plan in a renewed effort to implement illegal student loan bailouts on the backs of hardworking American taxpayers. 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. Interest will not be assessed retroactively.
Detailed information for borrowers about court actions related to Income-Driven Repayment (IDR) plans is available at http://StudentAid.gov/courtactions.
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.
Income-Driven Repayment (IDR) Application
Applying for an IDR Plan is quick and easy if borrowers provide consent for the Department to obtain their federal tax information directly from the Internal Revenue Service. This allows the Department to process borrowers’ IDR applications faster and eliminates the need for borrowers to manually upload their income information. When borrowers allow the Department to access their federal tax information, annual recertification of borrowers’ IDR plans is automatic.
The Department continues to make progress on the backlog of submitted IDR applications because of a processing pause put in place by the Biden Administration. Borrowers switching from the SAVE Plan to another IDR plan can expect quick and timely processing.
Collections
The Department resumed collections on May 5 after a five-year hiatus and has emailed more than 23 million borrowers reminding them of their legal obligation to repay their loans as well as the benefits of making regular progress toward repayment.
As of late June, the Department received nearly $282 million in collections on defaulted federal student loans through voluntary payments and the Treasury Offset program administered by the U.S. Department of Treasury. The Department has not thus far withheld monthly federal benefits, such as Social Security payments, since restarting collections.
The Department expects administrative wage garnishment to begin later this summer. back...
The U.S. Department of Education will take an additional step to bring fiscal responsibility to the federal student loan portfolio by restarting interest accrual for borrowers with loans in the illegal Saving on a Valuable Education (SAVE) Plan on August 1, 2025. The Department will take this action to comply with a federal court injunction that has blocked implementation of the SAVE Plan, including the Department’s action to put SAVE borrowers in a zero percent interest rate status. The Department had the authority under the SAVE plan to prevent borrowers from going into negative amortization, which is the authority the Department relied on to put borrowers in zero percent interest rate status. Outside of that regulatory provision in SAVE (which is enjoined), the Department lacks the authority to put borrowers into a zero percent interest rate status.
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. 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.
The Trump Administration will support borrowers in selecting a new, legal repayment plan that best fits their needs and helps them get on a sustainable financial path while protecting American taxpayers. Tomorrow, the Department will begin direct outreach to the nearly 7.7 million borrowers enrolled in the SAVE Plan, with instructions on how to move to a legal repayment plan so borrowers can begin making qualifying payments.
“For years, the Biden Administration used so-called ‘loan forgiveness’ promises to win votes, but federal courts repeatedly ruled that those actions were unlawful. Congress designed these programs to ensure that borrowers repay their loans, yet the Biden Administration tried to illegally force taxpayers to foot the bill instead,” 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. 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.”
Just weeks after the Supreme Court ruled the Department cannot unilaterally waive federal student loans in Biden v. Nebraska, the Biden Administration announced the SAVE Plan in a renewed effort to implement illegal student loan bailouts on the backs of hardworking American taxpayers. 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. Interest will not be assessed retroactively.
Detailed information for borrowers about court actions related to Income-Driven Repayment (IDR) plans is available at http://StudentAid.gov/courtactions.
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.
Income-Driven Repayment (IDR) Application
Applying for an IDR Plan is quick and easy if borrowers provide consent for the Department to obtain their federal tax information directly from the Internal Revenue Service. This allows the Department to process borrowers’ IDR applications faster and eliminates the need for borrowers to manually upload their income information. When borrowers allow the Department to access their federal tax information, annual recertification of borrowers’ IDR plans is automatic.
The Department continues to make progress on the backlog of submitted IDR applications because of a processing pause put in place by the Biden Administration. Borrowers switching from the SAVE Plan to another IDR plan can expect quick and timely processing.
Collections
The Department resumed collections on May 5 after a five-year hiatus and has emailed more than 23 million borrowers reminding them of their legal obligation to repay their loans as well as the benefits of making regular progress toward repayment.
As of late June, the Department received nearly $282 million in collections on defaulted federal student loans through voluntary payments and the Treasury Offset program administered by the U.S. Department of Treasury. The Department has not thus far withheld monthly federal benefits, such as Social Security payments, since restarting collections.
The Department expects administrative wage garnishment to begin later this summer. back...
