Millions of student loan borrowers who signed up for the SAVE plan will start seeing interest accrue to their accounts on Friday.
The Biden-era zero-interest repayment plan, called Saving on a Valuable Education (SAVE), was created to help lighten the financial burden faced by student loan borrowers.
On July 9, the Department of Education announced that it planned to resume charging interest. The move will affect 7.7 million people on the SAVE plan.
The program is set to end by 2028 as part of a spending package passed by Congress. The Education Department is encouraging enrollees to switch to a different repayment plan.
The move that goes into effect on Aug. 1 was done to comply with a federal court injunction and help bring “fiscal responsibility to the federal student loan portfolio,” the Education Department said.
SAVE, which was implemented in August 2023, faced legal challenges after it began. In 2024, federal judges in Kansas and Missouri blocked the program, arguing that the Biden administration had overstepped its authority by providing debt relief without receiving approval from Congress.
After the court decision, SAVE borrowers were placed in no-interest forbearance. Payments were paused and balances were frozen, but have now resumed.
A typical borrower could see an increase of $300 per month due to the resumed interest charged, CBS News reported, citing a calculation by the Student Borrower Protection Center, an advocacy group for people with higher-education debt.
The Education Department advised borrowers to use a Loan Simulator to calculate future payments.
For now, borrowers on the SAVE plan have been moved into a general forbearance and will not have required monthly payments. However, according to Federal Student Aid, balances will come due, along with all accrued interest, when “the legal situation changes or servicers are able to send bills to borrowers at the appropriate monthly amount.
“The most significant impact is that your total loan balance will start growing again” because interest will resume, Bethany Hubert, a financial aid specialist at lender Earnest, told CBS MoneyWatch. “If you choose not to make payments, the accruing interest can really balloon your balance, making it much more challenging and expensive to pay back over time.”
The application for the income-based repayment, Pay As You Earn and income-contingent repayment plans has been available since March 26, 2025, according to Federal Student Aid.