Today, the U.S. Department of Education announced a new measure to address fiscal responsibility in federal student loans by restarting interest accrual for borrowers under the Saving on a Valuable Education (SAVE) Plan on August 1, 2025. This action follows a federal court injunction blocking the implementation of the SAVE Plan, which included placing borrowers in a zero percent interest rate status.
The Department had previously used its authority under the SAVE plan to prevent negative amortization by putting borrowers in zero percent interest rate status. However, outside this regulatory provision, now enjoined, the Department lacks such authority.
Many borrowers enrolled in the Biden Administration’s SAVE Plan based on promises of loan cancellation and zero monthly payments, despite multiple court rulings against these policies. The administration also introduced a "litigation forbearance" at zero percent interest, causing confusion among borrowers regarding legal repayment methods.
The Trump Administration is offering support to help borrowers select new legal repayment plans that fit their needs while safeguarding taxpayer interests. Direct outreach will begin soon to nearly 7.7 million affected borrowers with instructions on transitioning to compliant repayment plans.
U.S. Secretary of Education Linda McMahon stated: “For years, the Biden Administration used so-called ‘loan forgiveness’ promises to win votes, but federal courts repeatedly ruled that those actions were unlawful. Congress designed these programs to ensure that borrowers repay their loans.”
After recent Supreme Court decisions and further legal challenges leading up to an April 2025 injunction from a federal district court, interest will resume on impacted loans starting August 1 without retroactive charges.
Borrowers can find detailed information about related court actions at StudentAid.gov/courtactions and are encouraged to use available tools like the Loan Simulator for comparing repayment options.
President Trump recently signed into law the One Big Beautiful Bill Act which includes an income-based Repayment Assistance Plan set for July 2026 launch. Meanwhile, restrictions may apply soon on PAYE and ICR Plans due to ongoing legal challenges; hence SAVE borrowers are urged toward Income-Based Repayment Plans under existing regulations.
Applications for Income-Driven Repayment (IDR) Plans remain straightforward with automatic processing through IRS data sharing consent—streamlining annual recertifications too—and efforts continue towards clearing application backlogs caused by prior administrative pauses.
Collections resumed earlier this year after five years paused with over $282 million collected via voluntary payments and Treasury Offset programs as reported late June; administrative wage garnishments are anticipated later this summer though certain federal benefits have not yet been withheld since collection restart initiatives began anew last May.
