Trump administration resumes interest on student loans in SAVE plan

In the United States, the Trump administration is preparing to enforce interest charges on student loans currently encompassed within the SAVE plan forbearance, effective August 1, 2025. This significant policy shift was initially reported by Politico and comes after a year-long suspension of interest accumulation for over eight million borrowers enrolled in the SAVE plan, which had put their payments on hold due to ongoing legal challenges. While the Department of Education had assured borrowers that their loans in forbearance would not accrue interest, the latest decision contradicts those assurances and represents a major turnaround in the administration's approach to student debt management. Moreover, the recent changes tie into a broader legislative agenda led by Republican lawmakers. A bill signed into law by President Trump seeks to repeal numerous favorable repayment plans while increasing monthly payments for millions of student loan borrowers. Critics of the legislation, including various borrower advocacy groups, argue that the new regulations represent a severe setback for borrowers, particularly those from lower-income backgrounds who may find additional repayment options increasingly difficult to navigate. This reform is expected to exacerbate financial pressures for those already struggling to manage their student debt, making loan repayments less feasible than before. Compounding the challenges, the Department of Education has communicated a lack of clarity regarding alternative repayment plan options for borrowers who may be adversely affected under the new law. The anticipated complexity and potential increases to financial obligations drawn from the new repayment plan, the Repayment Assistance Plan (RAP), may lead to confusion and difficulties for current undergraduate and graduate students trying to finance their education. Without providing adequate time or guidance to borrowers, the department is poised to complicate the repayment landscape significantly, limiting their ability to successfully manage debt while seeking higher education. In summary, this transition marks yet another phase in the tumultuous landscape of federal student loan management, igniting fierce criticism from advocates working on behalf of borrowers. The implications of this move could be widespread, as it not only challenges borrowers' immediate financial stability but potentially deters prospective students from pursuing higher education altogether. With greater financial burdens looming, discussions surrounding educational financing and student debt are set to intensify in the coming months as borrowers seek ways to adapt to this evolving situation.