The SAVE plan has been in legal limbo for months since the program was struck down by a federal appeals court.
WASHINGTON — It’s August 1, which means the Department of Education has begun accruing interest again for student loan borrowers who signed up for the Biden-era SAVE plan.
The SAVE plan has been in legal limbo for months since the program was struck down by a federal appeals court. While it has been battling its way through the courts, interest has not been accruing on loans under the program, because there were still unanswered questions about what borrowers would have to pay.
But in July, Trump administration officials said they would restart interest accrual for federal loans using the SAVE plan.
Under President Donald Trump, the Education Department said it would roll back the “illegal” program, and that the department has no authority to put student loan borrowers in a zero percent interest rate status.
The announcement came weeks before the Aug. 1 deadline, leaves little time for borrowers to prepare or consider their options.
What is the SAVE plan?
The SAVE plan, officially called the Saving on a Valuable Education plan, was enacted by former President Joe Biden in 2023. It aimed to reduce the monthly payments for those with federal student loan debt based on their income and family size. Those who signed up for the program were also potentially eligible for loan forgiveness after a number of payments toward their debt.
For many borrowers, especially those with lower incomes, this resulted in lower payments, with some paying $0 per month.
The program was challenged by Republicans in court, and in Feb. 2025, a federal judge put a pause on the program. While the program was stuck in legal limbo, the federal government set the interest rate for debt under it to 0% while the challenges played out.
What happens if my loans are part of the SAVE plan?
The Trump administration is encouraging borrowers to switch to a new repayment plan for their student loans. In a statement, the Department of Education said it would be reaching out to the 7.7 million people currently under the SAVE plan to determine their next steps.
“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,” the statement said.
If a borrower does stay with the SAVE plan, the balance on their loan will begin increasing starting on Aug. 1.
Payments toward student loan debt under the program, which resumed in May, will increase based on the amount of interest accumulated. The Education Department says that interest will not be calculated retroactively, meaning borrowers won’t get a massive spike in their payments due in August.
Trump’s “Big, Beautiful Bill” cuts available options
The budget bill approved by Congress last week with Trump’s backing is a massive, 900-page document. But among its provisions were cuts to the number of payment plans available to student loan borrowers.
Under the bill, there are only two federal repayment plans available to borrowers. The first is a standard plan that allows borrowers to repay their loans over 10 to 25 years, with payments based solely on the loan amount.
The other, a “Repayment Assistance Plan,” is a replacement for the SAVE program. This plan is a fixed-rate program that would put monthly payments between 1% and 10% of their income. That program, according to some analysts, disadvantages lower-income families.
The Repayment Assistance Plan is set to begin on July 1, 2026.
Great Job & the Team @ WFAA RSS Feed: news Source link for sharing this story.
