Interest Resumes on Student Loans

Last month, interest resumed on federal student loans for approximately 8 million borrowers enrolled in the Saving on a Valuable Education (SAVE) repayment plan. Although monthly payments are still not required, loan balances are now growing again due to accumulating interest.

The SAVE plan had previously paused interest through a zero-interest forbearance period, meaning balances remained unchanged while payments were deferred. That changed after federal court rulings blocked key provisions of the plan, prompting the Department of Education to reinstate interest accrual while maintaining the payment pause until at least July 1, 2028.

While borrowers do not currently need to make payments, interest is now being added to their loan balances each month. According to federal estimates, a typical borrower could see their balance grow by about $300 per month in interest—totaling more than $3,500 annually if they remain in forbearance.

The Department of Education is advising borrowers to consider other repayment options, such as the Income-Based Repayment (IBR) plan or the upcoming Repayment Assistance Plan (RAP), which is expected to launch in 2026. These options are compliant with current court rulings and are likely to replace SAVE by mid-2028 under new legislation.

Borrowers are also encouraged to use tools like the Federal Student Aid Loan Simulator to compare repayment plans and find the best fit for their financial situation.

Meanwhile, loan servicers are working through a significant backlog of plan-change requests, with an estimated 1.5 to 2 million borrowers currently waiting to switch from the SAVE plan to other repayment options. These delays could temporarily prevent some borrowers from locking in more favorable repayment terms.

The resumption of interest has also reignited debate over student loan forgiveness and repayment policy more broadly. While some advocates argue for expanded relief or income-driven repayment reforms, many Americans believe students should be responsible for paying back their own loans, especially in light of the federal government’s role as lender. The discussion continues to divide policymakers and the public, with questions of fairness, accountability, and economic impact at the center of the conversation.