The U.S. Education Department directed its federal student loan servicers to restart interest accrual on Aug. 1 for participants in the Biden-era SAVE plan. (Catherine Lane/Getty Images)
WASHINGTON — Interest accrual on the debt of nearly 7.7 million student loan borrowers enrolled in the Saving on a Valuable Education plan will resume Aug. 1, the U.S. Education Department said Wednesday.
The Biden-era income-driven repayment plan better known as SAVE saw legal challenges from several GOP-led states beginning in 2024, creating uncertainty for borrowers who were placed in an interest-free forbearance amid that legal limbo.
The SAVE plan, created in 2023, aimed to provide lower monthly loan payments for borrowers and forgive remaining debt after a certain period of time.
In February, a federal appeals court upheld a lower court injunction that blocked the SAVE plan from going into effect. The department said Wednesday that it’s instructing its federal student loan servicers to start charging interest Aug. 1 to comply with court orders.
When the SAVE plan forbearance ends, “borrowers will be responsible for making monthly payments that include any accrued interest as well as their principal amounts,” the department said in a written announcement.
“For years, the Biden Administration used so-called ‘loan forgiveness’ promises to win votes, but federal courts repeatedly ruled that those actions were unlawful,” Education Secretary Linda McMahon said in a statement alongside the announcement.
“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,” she added.
McMahon said her department is urging borrowers under the SAVE plan to “quickly transition to a legally compliant repayment plan.”
“Borrowers in SAVE cannot access important loan benefits and cannot make progress toward loan discharge programs authorized by Congress,” she said.
‘Unnecessary interest charges’
Mike Pierce, executive director of the Student Borrower Protection Center, blasted the department’s decision in a statement Wednesday.
“Instead of fixing the broken student loan system, Secretary McMahon is choosing to drown millions of people in unnecessary interest charges and blaming unrelated court cases for her own mismanagement,” he said.
“Every day, we hear from borrowers waiting on hold with their servicer for hours, begging the government to let them out of this forbearance, and help them get back on track — instead, McMahon is choosing to jack up the cost of their student debt without giving them a way out.”
The agency has taken heat for its sweeping actions in the months since President Donald Trump took office as he and his administration look to dismantle the department.
The department is also mired in a legal challenge over some of its most significant efforts so far, including laying off more than 1,300 employees earlier this year as part of a reduction in force effort, an executive order calling on McMahon to facilitate the closure of her own agency and Trump’s proposal to transfer some services to other federal agencies. These actions have been temporarily halted in court.
Meanwhile, President Donald Trump signed a massive tax and spending cut bill into law last week, part of which forces any borrower under the SAVE plan to opt in to a different repayment plan by July 1, 2028, or be automatically placed in a new, income-based repayment plan.
This post was originally authored and published by Shauneen Miranda from Missouri Independent via RSS Feed. Join today to get your news feed on Nationwide Report®.
