Restarted student loan interest for SAVE plan recipients leaves some feeling overwhelmed
Student Loan Borrowers Face Resumption of Interest on SAVE Plan Loans
A significant number of student loan borrowers are bracing for an increase in their loan balances, as the Department of Education announced that interest will once again start accruing on loans held by borrowers enrolled in the Saving on a Valuable Education (SAVE) plan, effective August 1, 2025.
The SAVE plan, launched in August 2023, faced legal challenges and was placed in no-interest forbearance last year. However, the 8th Circuit Court of Appeals issued an injunction and later a final ruling ending the SAVE plan's implementation. As a result, the Biden administration placed SAVE loans in forbearance with 0% interest pending the ruling.
The SAVE plan aimed to accelerate loan forgiveness for some low-income borrowers and prevented interest from ballooning. It increased the income exemption for calculating discretionary income from 150% to 225% of the federal poverty guideline, greatly reducing payment amounts. It also lowered required payments to 5% of discretionary income for undergraduate loans and to 10% for graduate loans, with a weighted average if a borrower has both. Borrowers with low or moderate incomes often had $0 or near $0 payments under SAVE.
However, due to the legal challenges, the SAVE plan is currently inactive. The Department of Education urges borrowers to switch to a "legally compliant repayment plan" instead of SAVE. Borrowers are encouraged to look for other IDR options such as Income-Based Repayment (IBR), although transitioning from SAVE could raise monthly payments due to SAVE’s more generous terms.
One borrower, Andrea Murzello, switched to the SAVE plan in 2023, which reduced her monthly payments to about $400. Murzello, who has a doctorate in pharmacy and works at a nonprofit, initially made monthly payments of around $1,000 under a student loan repayment program for public servants.
Another borrower, Bronte Remsik, a medical resident, graduated with close to $300,000 in student loans and applied for the SAVE plan, but her application was never processed. Remsik, who feels overwhelmed by the financial burden of her student loans after graduating from medical school, expressed her frustration with the growing federal backlog and lack of clear guidance.
With interest starting again, it is advised to at least cover monthly interest to avoid loan balance growth. If possible, making lump sum payments during the transition period may help manage balances. The Department of Education has a backlog of approximately 1.5 million applications from borrowers seeking to switch into different income-driven repayment plans.
In the meantime, the Department of Education is working on a new income-driven plan, the Repayment Assistance Plan (RAP), which is slated for 2026. RAP sets payments as low as $10 per month for earners under $10,000 annually and bases other payments on 1%-10% of income with adjustments for children. However, RAP may involve higher payments than SAVE for some borrowers.
The current situation leaves many borrowers feeling stuck in limbo, unsure of what their next steps should be. The CNN report is from The-CNN-Wire & 2025 Cable News Network, Inc., a Warner Bros. Discovery Company.
References:
- CNN, 2025
- Education Data Initiative, 2023
- Federal Student Aid, 2025
- Forbes, 2023
- As student loan borrowers prepare for the resumption of interest on their SAVE plan loans, they might find it beneficial to keep abreast of general news about finance to understand the potential impact on their loan balances.
- Meanwhile, the ongoing legal challenges in education-and-self-development, particularly concerning the SAVE plan, may also have broader implications in politics, emphasizing the need for lawmakers to address student loan debt effectively.
