The SAVE plan was introduced under President Biden in January 2023.
Andrew Caballero-Reynolds/AFP via Getty Images
The Education Department will soon begin charging interest for the nearly 7.7 million borrowers on the Saving on a Valuable Education repayment plan, according to a Wednesday announcement.
Borrowers enrolled in SAVE haven’t had interest accrue on their loans in the last year, since federal judges put the repayment plan on hold and the Biden administration instituted an interest-free payment pause.
Higher education experts say the resumption, which will take effect Aug. 1, is the Trump administration’s latest effort to push borrowers away from a Biden-era loan-forgiveness effort it disagrees with. But department officials say they are complying with an April court order.
“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,” Education Secretary Linda McMahon said in the release. “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.”
Instead of getting caught in the political crosshairs, what borrowers need is stability and predictability, Melanie Storey, president of the National Association of Student Financial Aid Administrators, said in an email to Inside Higher Ed.
“That could—and should—be achieved through a thoughtful reauthorization of the Higher Education Act,” she added. “Even with aggressive outreach, three weeks does not leave much time for borrowers to enroll in a new repayment plan, particularly when a significant backlog of applications already exists.”
Although interest will begin accruing on borrowers’ existing balances, they will not have to start making monthly payments until the pause known as forbearance ends. The department’s release didn’t say when that would be.
