Education Department Resumes SAVE Plan Interest Accrual

Student loan borrowers still enrolled in the Saving for a Valuable Education plan will see interest accrue on their balances next month for the first time in nearly a year.

The Education Department said Wednesday that loans for nearly 7.7 million borrowers still enrolled in the SAVE repayment plan will resume accruing interest starting Aug. 1. Borrowers enrolled in former President Joe Biden’s generous income-driven repayment plan have been in a zero-interest forbearance for nearly a year as courts debated whether the administration legally had the right to administer the SAVE plan.

Borrowers enrolled in that plan have been stuck in limbo during that time, waiting to see what will happen to the plan. They recently got a solid answer about the plan’s fate, as the ‘One Big, Beautiful Bill’ Act calls for eliminating SAVE and other income-driven repayment plans by July 1, 2028.

Borrowers Encouraged To Move To Another Repayment Plan

The department said it will begin reaching out to SAVE borrowers with instructions on moving to another repayment plan where they can make qualifying payments toward loan forgiveness.

“Borrowers in SAVE cannot access important loan benefits and cannot make progress toward loan discharge programs authorized by Congress,” Secretary of Education Linda McMahon said in the press release.

The department encouraged all SAVE borrowers to “quickly transition” into IBR, the only existing income-driven repayment plan available for current borrowers after 2028. IBR will likely be from $100 to $200 more expensive monthly for the average borrower, compared to their payments while they were on SAVE, according to calculations by Investopedia.

Borrowers will also have the option of enrolling in the newly created Repayment Assistance Plan (RAP) by July 1, 2026. For the average borrower, payments under RAP will also be more expensive than the SAVE plan.