Millions of student loan borrowers begin accruing interest again

Millions of student loan borrowers will begin accruing interest on their loans.

The change comes after the Department of Education stopped the cancellation of student loans and income-based repayment plans.

“Attention student loan borrowers enrolled in the SAVE Plan. On August 1, the Department of Education will resume charging interest on your loans,” Sec. Linda McMahon of the Department of Education said. 

The SAVE Plan, introduced under former President Joe Biden’s administration, lowers monthly payments and shortens the time it takes to receive student loan forgiveness based on enrollees income.

Now, that plan and eight million or so borrowers who utilized it are in for some changes. 

“This plan has been tied up in litigation, and the Trump administration decided, without ever being forced by a court, to start interest charges for those borrowers,” Mike Pierce, co-founder and Executive Director of Student Borrower Protection Center, said.

Last year, federal judges in Kansas and Missouri blocked key parts of the SAVE Plan. Following those courts decisions, SAVE borrowers were placed in no interest forbearance with payments paused and balanced frozen since last summer.

On Friday, interest will start to accrue again.

“Once payments start, we expect they’re going to pay about $5,000 more per year, including those interest charges, once they actually have to start making payments,” Pierce said.

Pierce says deciding what to do next is up to individuals. Starting payments now continue with forbearance. But either way, their balances will increase, causing stress for borrowers.