Student Loan Interest Freeze Ends for 7.7 Million Under SAVE Plan

WASHINGTON DC — The U.S. Department of Education announced on July 9 that interest will resume accruing on federal student loans enrolled in the Saving on a Valuable Education (SAVE) income-driven repayment program beginning August 1. The change impacts approximately 7.7 million borrowers currently benefiting from the program. The department cited a February ruling by the Eighth Circuit Court of Appeals, which upheld a preliminary injunction blocking the SAVE plan, including its provision that prevented interest accumulation.

“Borrowers in SAVE cannot access important loan benefits and cannot make progress toward loan discharge programs authorized by Congress,” Education Secretary Linda McMahon stated in the official announcement. She advised borrowers to consider switching to other legally compliant income-driven repayment options, such as the Income-Based Repayment (IBR) plan.

Until now, borrowers in the SAVE program had been under zero-interest forbearance. The court’s decision now requires that interest be reinstated, which could mean an average annual increase of $3,500 in interest for each affected borrower. Notifications are expected to begin rolling out on July 10, providing guidance on transitioning to different repayment plans.

President Trump’s recent signing of the “One Big Beautiful Bill” on July 4 has introduced sweeping reforms to federal student loan repayment programs. Under the new law, SAVE will be phased out by July 1, 2028. Borrowers will then be required to enroll in either a standard repayment plan or a new Repayment Assistance Plan (RAP), which is scheduled to become available in July 2026. In the meantime, the Department of Education recommends temporarily switching to IBR until RAP is in place.

Borrowers will be responsible for both principal and accrued interest payments once the forbearance ends on August 1. Transferring into a new income-driven repayment plan does not require a new application, though a current backlog of roughly 1.6 million requests may cause delays. The Department has committed to prioritizing transfers from the SAVE program.

The decision has drawn criticism from advocacy groups. Mike Pierce of the Student Borrower Protection Center called the move “a betrayal” of working-class borrowers, warning that monthly payments will rise significantly. Melanie Storey, president of the National Association of Student Financial Aid Administrators (NASFAA), expressed concern over the short notice, describing the change as adding confusion and uncertainty for borrowers.

Borrowers are encouraged to use the Loan Simulator tool on the Department of Education’s website to compare available repayment options and estimate future monthly payments.

“Borrowers are again caught in the political crosshairs regarding student loan repayment,” Storey said.

-----------

At Cleveland 13 News, we strive to provide accurate, up-to-date, and reliable reporting. If you spot an error, omission, or have information that may need updating, please email us at tips@cleveland13news.com. As a community-driven news network, we appreciate the help of our readers in ensuring the integrity of our reporting.