Millions Of Student Loan Borrowers Brace As Interest Charges To Start Again

Starting in August, nearly 8 million student loan borrowers will see interest charges resume on their loans, following a decision by the Trump administration. These borrowers, enrolled in the Saving on a Valuable Education (SAVE) plan, have not had to pay interest since last year due to ongoing court proceedings. The Education Department announced the change, citing a court injunction that blocked the implementation of the SAVE plan.

According to Forbes, the resumption of interest could cost borrowers an average of $3,500 more per year. The Student Borrower Protection Center (SBPC) estimates this will result in an additional $27 million in accrued interest over a year. The Education Department recommends that borrowers transition to other income-driven repayment plans, though a backlog of applications may delay this process.

The SAVE plan was initially paused following litigation by Republican-led states, which argued that the Education Department exceeded its authority. The court ruling did not explicitly mandate the resumption of interest, making the decision a discretionary policy change.

The announcement comes amid broader changes to the student loan system, including a new law signed by President Donald Trump that will overhaul repayment options. Starting in July 2026, new borrowers will have limited repayment options, potentially increasing costs for low-income borrowers.

Borrowers are advised to evaluate their options, especially those seeking Public Service Loan Forgiveness or other debt relief programs. The Education Department is working through a backlog of over 1.5 million applications, which could delay borrowers' ability to switch plans.