Editor’s Note: This story has been updated to correct a typo in the headline.
The Education Department will restart interest charges on federal student loans held by 7.7 million borrowers in President Joe Biden's stalled Saving on a Valuable Education, or SAVE, repayment plan, the agency said Wednesday.
What Happened: Interest will begin accruing August 1, ending a year-long, court-ordered forbearance that had kept balances frozen while the administration defended the program against lawsuits from Republican-led states.
The advocacy group Student Borrower Protection Center estimates that the average enrollee could accrue roughly $3,500 in interest over 12 months, or approximately $300 per month. The department stated that the change is required by a February appeals court ruling that broadened an injunction to cover the entire regulation underpinning SAVE, including its interest subsidy.
Education Secretary Linda McMahon, installed under President Donald Trump, told The Washington Post that Biden had "used so-called ‘loan forgiveness' promises to win votes," but courts found those actions unlawful.
Borrowers can still postpone payments through the same forbearance, but interest will now grow unless they switch to another income-driven plan — a process slowed by a 2 million-application backlog at loan servicers. McMahon urged borrowers to "quickly transition to a legally compliant repayment plan."
Why It Matters: The decision follows Trump's signature last week on the sweeping "One Big Beautiful Bill," which shutters SAVE to new enrollees and gives current participants until July 2028 to exit. Consumer advocates called the new interest charges a back-door way to push borrowers out sooner.
Critics also questioned the timing. The February order does not explicitly demand reinstating interest and previous department guidance told SAVE borrowers that interest would remain paused until the legal situation changes.
SAVE, unveiled in 2023, promised lower payments and faster forgiveness but has remained in legal limbo since a Missouri-led coalition sued, arguing Biden lacked congressional authority for the multibillion-dollar initiative.
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