The U.S. Department of Education will restart SAVE Plan interest accrual for nearly 7.7 million borrowers on August 1, 2025, following a federal court injunction that declared the Saving on a Valuable Education (SAVE) Plan unlawful. This action complies with court orders blocking the Biden-era plan, which had placed borrowers in a zero percent interest forbearance since June 2024. The Department lacks authority to maintain zero interest rates outside the enjoined SAVE Plan provisions, prompting the resumption of SAVE Plan interest accrual.
The SAVE Plan, introduced in 2023, aimed to lower monthly payments and offer loan forgiveness but faced legal challenges. In June 2024, a federal court blocked parts of the plan, and in February 2025, the Eighth Circuit Court of Appeals ruled it illegal. A district court injunction in April 2025 enforced this decision, leading to the Department’s directive to resume SAVE Plan interest accrual. Interest will not be applied retroactively, but borrowers’ balances will grow starting August 1.
“For years, the Biden Administration used so-called ‘loan forgiveness’ promises to win votes, but federal courts repeatedly ruled that those actions were unlawful,” said U.S. Secretary of Education Linda McMahon. “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”.
Transitioning to Legal Repayment Plans
Starting July 11, 2025, the Department will contact SAVE Plan borrowers with guidance on switching to legal repayment plans, such as the Income-Based Repayment (IBR) Plan, to avoid SAVE Plan interest accrual impacts. Borrowers can use the Loan Simulator on StudentAid.gov to compare options and estimate payments. Those previously enrolled in IBR, Pay As You Earn (PAYE), or Income-Contingent Repayment (ICR) need not reapply. However, PAYE and ICR face legal challenges and future enrollment restrictions under the One Big Beautiful Bill Act, signed July 4, 2025, which introduces a new Repayment Assistance Plan by July 1, 2026.
Streamlined IDR Application Process
Applying for an IDR plan is efficient with borrower consent for the Department to access IRS tax data, enabling faster processing and automatic annual recertification. The Department is addressing a backlog of IDR applications caused by a prior processing pause, ensuring timely handling for those switching plans to manage SAVE Plan interest accrual.
Collections and Fiscal Responsibility
On May 5, 2025, the Department resumed collections on defaulted loans, collecting $282 million by late June through voluntary payments and the Treasury Offset Program. Administrative wage garnishment is planned for later this summer. The resumption of SAVE Plan interest accrual aligns with efforts to strengthen the student loan portfolio while protecting taxpayers.
Background and Legal Context
The SAVE Plan followed the Supreme Court’s 2023 ruling in Biden v. Nebraska, which blocked unilateral loan forgiveness. Despite this, the Biden Administration’s SAVE Plan was struck down for exceeding congressional authority. The Trump Administration emphasizes sustainable repayment options, urging borrowers to act swiftly to mitigate SAVE Plan interest accrual and progress toward loan discharge programs like Public Service Loan Forgiveness.
