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- After a year's pause, interest charges for SAVE student-loan borrowers restart in August.
- Trump's administration recommended that borrowers on SAVE switch to a new repayment plan.
- Beginning next year, borrowers will have two repayment options due to Trump's spending law.
President Donald Trump isn't saving the SAVE plan.
The Department of Education announced earlier in July that interest charges for student-loan borrowers on the SAVE plan are restarting on August 1 after being paused for a year while the plan was facing legal challenges.
SAVE, created by former President Joe Biden, intended to give borrowers more affordable monthly payments with a shorter timeline to debt relief. The plan was blocked in July 2024, and 8 million enrolled borrowers have been in a forbearance without interest accumulating.
That relief is officially over. The department said that it is restarting interest charges on SAVE accounts to comply with the court order that blocked the plan, although the order did not explicitly provide instructions on handling the interest charges. Interest rates vary depending on when the loan originated. Today's undergraduate direct rate is 6.39%.
Linda McMahon, Trump's education secretary, said in a statement that she recommends borrowers "quickly transition to a legally compliant repayment plan," like income-based repayment, to avoid balance growth.
Some Democratic lawmakers previously criticized the interest charge restart and urged the administration to reverse course. On July 14, Sens. Elizabeth Warren, Bernie Sanders, and Chuck Schumer sent a letter to McMahon saying that the restart is "devastating for millions of American families."
"It defies logic and the law that a months-old preliminary injunction against SAVE, which makes no mention of the interest-free forbearance, requires you to start charging interest to millions of borrowers in forbearance now," they wrote.
The lawmakers also cited a backlog in income-driven repayment plan processing that would make it difficult for borrowers on SAVE to switch to a new plan. While the department said in its press release announcing the interest charges that borrowers who switch to a new plan "can expect quick and timely processing," the department in May reported a backlog of nearly 2 million income-driven repayment applications.
The income-based repayment plan, which the department specifically mentioned as a viable option for SAVE borrowers, is also facing a debt relief processing delay. The department posted on Federal Student Aid that loan forgiveness through IBR plans is paused to update payment counts without providing a timeline for when relief will resume.
For now, borrowers can choose to remain on SAVE while interest accumulates, or they can switch to a new plan and make payments. Due to Trump's spending law, student-loan borrowers will have two repayment options beginning July 2026: a standard repayment plan or a new Repayment Assistance Plan that forgives borrowers' balances after 30 years.
The new plans are less generous than existing ones, including the SAVE plan, which Trump's spending law eliminates.
These changes come amid Trump's broader plans to dismantle the Department of Education. The Supreme Court ruled that the department can proceed with firing nearly 1,400 workers, and limited staff means likely hurdles in carrying out the student-loan repayment overhaul.
Are you enrolled in the SAVE plan? Share your thoughts with this reporter at asheffey@businessinsider.com.
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