SAVE Plan Interest on Student Loans Resuming: What You Need to Know

Debt talk is never fun, especially when diving into the world of student loans. But knowing exactly what changes on August 1st can save you four‑ and five‑figure mistakes down the line.

Beginning that date, the Department of Education will let interest accrue again on all loans sitting in the automatic SAVE forbearance. Monthly bills are still paused until at least the fall of 2025, yet your balance will begin ticking upward unless you act.

Knowing this, let’s chat through the new SAVE and income-based loan repayment strategies.

What SAVE Was—and Why It’s on Ice

Saving on a Valuable Education (SAVE) launched in 2024 as the most generous income‑driven repayment (IDR) plan:

5% of discretionary income for undergraduate debt, 10 % for graduate, with any unpaid interest wiped so balances could not grow.

Lawsuits derailed key pieces of the program in February this year, and a federal judge later ruled the whole plan illegal. While the Department of Education appeals, borrowers enrolled in SAVE were placed into an “administrative forbearance” that paused payments and, until now, interest.

That interest‑free window will end August 1.

Where SAVE fits inside Income-Driven Repayment options
“IDR” is the umbrella term for plans that tie loan payments to income and forgive remaining balances after 20–25 years (or just 10 years if you also qualify for Public Service Loan Forgiveness).

As of writing (July 2025), the IDR plans that still exist are:

*Years of qualifying payments; you must re-certify income annually. Federal Student Aid

Who’s Impacted By This Change to SAVE?

• Around 8 million borrowers currently enrolled or applied for SAVE and still sitting in the automatic forbearance.

• This includes direct loan borrowers who entered SAVE for Public Service Loan Forgiveness (PSLF), Income‑Driven Repayment (IDR) forgiveness, or pure cash‑flow relief.

The Decision Tree For Those With Loans

A. Pursuing PSLF

B. Pursuing 20‑ or 25‑Year IDR Forgiveness

• Switch ASAP. Months spent in forbearance do not count toward IDR forgiveness and there is no Buy‑Back option.

• Use the FSA Loan Simulator to compare IBR vs. PAYE.

C. Not Seeking Forgiveness

• You can:

  1. Stay in forbearance through mid‑2026 (or earlier if the courts lift it) and pay just the accruing interest, or

  2. Switch to a new IDR now and resume full amortizing payments.

• If you can spare cash before Aug 1, making a lump‑sum toward principal now maximizes interest‑free payoff.

15‑Minute Action Checklist (Before August 1st)

1. Confirm loan status in your servicer portal — make sure all loans say “Administrative Forbearance.”

2. Run numbers in the Federal Student Aid Loan Simulator for IBR, PAYE, ICR.

3. Decide:

   • Stay in SAVE forbearance

   • Apply for a new IDR plan (submit application online; keep proof)

4. Update income docs if switching plans to avoid processing delays.

5. Calendar reminders

   • Aug 1: Interest starts.

   • Oct 1: Re‑check servicer for any unexpected bills.

FAQs

Will my payment jump if I switch? Likely yes. Example: $60k income, $30k debt → ~$217 on SAVE vs. ~$310 on IBR.

How long will the forbearance really last? Current guidance is until mid‑2026 or until courts settle the SAVE case and servicers can bill accurately.

Can I refinance privately? Possible, but you’d forfeit federal protections and PSLF eligibility. Latest rates (July 2025) hover around 6% fixed for physicians with steady income.

Resources

• Federal Student Aid Loan Simulator

• PSLF Help Tool

• Income‑Driven Repayment Application

• Institute of Student Loan Advisors

In Summary

We know this stuff can be overwhelming. But we’re confident in your ability to learn it.

As long as you equip yourself with the knowledge and understand your exact debt situation, you’ll be able to handle any program change that comes about.

Keep an eye out for future articles on student loan management.

Best,

M&H