July 18, 2025

After months of legal uncertainty, interest will officially resume for borrowers enrolled in the SAVE (Saving on a Valuable Education) repayment plan beginning August 1, 2025. This change is part of the One Big Beautiful Bill Act, signed into law on July 4, 2025, which significantly reshaped federal student loan repayment options moving forward.

With the SAVE interest subsidy coming to an end, borrowers need to act quickly to understand their new responsibilities and prepare for upcoming changes in repayment structure.

Under the previous version of SAVE, interest that wasn’t covered by monthly payments was subsidized, meaning borrowers with low or $0 monthly payments saw their balances stay the same or even decrease. However, under the new law:

• Interest will begin accruing again starting August 1, 2025.
   
• Monthly payments under SAVE remain paused until Fall 2025, but interest will grow in the meantime.
   
• SAVE will be completely phased out by July 1, 2028, and borrowers will need to transition to either Income-Based Repayment (IBR) or the newly introduced Repayment Assistance Plan (RAP).

The new legislation came in response to federal court rulings that found portions of the SAVE plan were not authorized by Congress. Lawmakers responded by creating a path to wind down SAVE and replace it with legally compliant repayment structures.

If you are one of the millions of borrowers currently in SAVE, this change affects your loan balance immediately—even if you’re still in a payment pause. While your monthly bill may not resume until later in the year, the interest clock starts ticking again on August 1.

This means your loan will begin growing every month unless you take action. For those with high balances or who’ve benefited from the zero-interest protections, this could mean a noticeable increase in what you owe.

1. Log In and Check Your Loan Details
Visit your loan servicer’s portal or StudentAid account to review your current balance, interest rate, and SAVE enrollment. Make note of your income as this will be crucial for determining your next steps.

2. Prepare to Transition to a New Plan
By 2028, SAVE will no longer exist. You’ll need to select between two primary options:

• Income-Based Repayment (IBR): Payments are based on your discretionary income. Forgiveness is offered after 20 or 25 years, depending on your loan type.
   
• Repayment Assistance Plan (RAP): A newer option set to launch in mid-2026. It calculates payments based on gross income and may offer more flexible terms for those with unstable income.
   

Borrowers should begin reviewing both programs to determine which best fits their financial situation.

3. Understand That Interest Is Back—Plan Accordingly
Even if you're not paying monthly yet, your loan balance will start growing again. Set a calendar reminder for August 1 and monitor how much interest accrues. This can help you avoid surprises when billing resumes later this year.

4. Recertify Early (If Eligible)
When recertifying your income for repayment, consider whether it’s better to use pay stubs or prior-year taxes. If your income has dropped recently, submitting pay stubs may result in a lower monthly payment once the payment pause ends.

5. Consult a Legal or Financial Professional
If you’re unsure which repayment plan to switch to, or if you’re close to qualifying for Public Service Loan Forgiveness (PSLF), consulting a student loan attorney or certified advisor can help protect your eligibility and save you money.

The Department of Education has announced it will contact SAVE borrowers between mid-July and early August 2025 with detailed instructions for transitioning to the new plans. Borrowers who do not respond or select a plan by the deadline may be automatically enrolled in IBR or RAP.

For most, Income-Based Repayment will likely result in higher monthly payments than SAVE. RAP may offer more affordable minimums, but details on interest subsidies and long-term forgiveness are still unfolding.

This is a crucial moment for borrowers. The protections and benefits of the SAVE plan are ending, and with interest resuming in August, your student loan balance could begin rising even before your payments do.

Taking action now—by understanding your repayment options, preparing to transition plans, and staying informed—can help minimize financial impact and set you up for long-term success. With the right strategy, you can stay on track toward forgiveness or payoff despite the policy shift.