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Impact LevelLow
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Scope LevelNational
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Last Update2025-08-01
Key Impacts
Negative Impacts (6)
Event Overview
The resumption of interest charges on student loans for SAVE plan participants highlights ongoing shifts in federal student debt policies. Income-driven repayment programs face legal challenges, impacting financial relief for millions. This reflects broader debates over government responsibility in managing educational debt burdens and borrower protections under evolving regulatory frameworks.
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Interest to Resume on Student Loans for SAVE Plan Borrowers Starting August 1
On August 1, the U.S. Department of Education will resume charging interest on student loans for nearly 8 million borrowers enrolled in the Saving on a Valuable Education (SAVE) repayment plan. Originally introduced under the Biden administration as an income-driven repayment plan, SAVE had allowed struggling borrowers to make reduced monthly payments, and for the last year, those payments and the accrual of interest were paused by a court injunction.
Andrea Murzello, a 34-year-old pharmacy doctorate holder, is one of the affected borrowers. After graduating in 2016 with over $200,000 in student loan debt, she initially entered a program for public service workers requiring around $1,000 in monthly payments before switching to SAVE in 2023, which reduced her payments to $400. She was able to cease payments entirely without penalty when the SAVE plan was paused last year. Murzello noted that prior to SAVE, her debt increased despite regular payments: “Instead of having any debt going downwards, I was seeing the opposite occur, because I just wasn’t able to pay enough to make any impact.” Entering SAVE, she said, “was very beneficial for me and my family.”
Following recent legal challenges, the interest-free period and payment pause under SAVE will end as of August 1. Interest will begin accruing monthly once more, although borrowers may still request forbearance to pause payments—however, interest will not be frozen during this time. The Department of Education has not specified an end date for this policy change. Roxanne Garza, director of higher education policy at EdTrust, highlighted, “These are people or individual families that have low income that were really relying on that … zero dollar for payment, that no longer are going to have that option.”
This resumption means balances for millions of SAVE plan borrowers will begin to rise again, reversing the temporary relief provided by the court injunction. The Department has not announced further adjustments or the duration of the resumed interest policy.