Thanks to the Biden-era program Saving on a Valuable Education (SAVE), a number of student loan borrowers have not been required to make their student loan payments. Unfortunately for those borrowers, that SAVE forbearance is now coming with a great cost.
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That’s because the Donald Trump administration began charging interest on the loans of SAVE-protected borrowers on Aug. 1, per CNBC. The loan borrowers are still able to stay in forbearance of their loans, but must now pay hefty interest rates that will increase their debt. As a result, the Department of Education has suggested to those who’ve relied upon SAVE to now find another plan.
For those who chose to remain with SAVE despite these changes, there are three things to be aware of.
Student Debt Balance Will Grow
The average outstanding federal loan balance owed by loan borrowers is approximately $39,000. With current interest rates (6.7%), loan borrowers owing roughly that amount — and who remain with the SAVE forbearance plan — should expect their monthly debt to increase by $219 at minimum. That’s an additional $2,628 per year in charges.
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No Progress Toward Student Loan Forgiveness
Yet another reason to consider another plan? Each payment made with other plans gets loan borrowers closer to a debt cancellation agreement. However, there is no such student loan forgiveness with the SAVE plan.
A New Repayment Plan Is Coming
It’s expected that by Jul. 1, 2028, the Department of Education will automatically move those who remain with SAVE to a new repayment plan created by President Trump’s “Big Beautiful Bill.” The new plan is known as the Repayment Assistant Plan (RAP); while the automatic switchover is not until 2028, it’s suspected that the Trump administration will require the switch to happen far sooner.
For those still taking part in SAVE forbearance, the most advantageous course of action would be to switch to a new plan, one that does not penalize with interest payments and that allows borrowers the potential for loan forgiveness. As it currently stands, SAVE appears more and more to be a dead-end street for student loan borrowers.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: 3 Things Student Loan Borrowers Can Expect Now That Interest on SAVE Plans Have Resumed
