Lana Oconnell
The resumption of student loan payments has been a dynamic issue, with changes occurring over time. In 2025, the U.S. Department of Education announced the resumption of interest accrual on loans under the SAVE plan from August 1, impacting around 7.8 million borrowers. This plan, introduced by President Biden in 2023, offered income-driven repayment options. President Trump's subsequent tax bill introduced new payment plans, including the Repayment Assistance Plan (RAP), effective from July 1, 2026. The RAP waives interest accrual if payments don't cover the full amount, but borrowers are committed for 30 years. The standard repayment plan under the tax bill introduces a tiered schedule based on loan balances. These changes primarily affect new borrowers, while existing borrowers have more time before transitioning to new plans. The FSA is committed to keeping borrowers informed about their payment options and has initiated outreach campaigns to ensure understanding.
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What You'll Learn
Changes to the SAVE plan
The Saving on a Valuable Education (SAVE) plan was introduced by the Biden administration in 2023. It was an income-driven repayment plan (IDR) that aimed to reduce borrowers' monthly bills by half. However, legal challenges blocked the program, and it was ultimately repealed by Congress. As a result, borrowers enrolled in the plan were placed in forbearance, with interest accruing as of August 1, 2025.
- Litigation and legislation: The SAVE plan faced legal challenges, which blocked its implementation and ultimately led to its repeal by Congress.
- Forbearance and interest accrual: Borrowers enrolled in the plan were placed in forbearance, which means their payments were paused. However, interest started accruing on these loans as of August 1, 2025.
- Lack of lower payments: Despite the SAVE plan's promise to reduce monthly bills, borrowers never received the benefit of lower payments due to the legal challenges and subsequent repeal.
- Impact on loan forgiveness: Time spent on the SAVE plan does not count toward loan forgiveness requirements. Borrowers working towards forgiveness will need to start their countdown again on other plans.
- Alternative repayment options: With the end of the SAVE plan, borrowers seeking affordable repayment options can consider the Income-Based Repayment (IBR) plan, which is another income-driven repayment plan.
- Loan discharge component pause: The Education Department paused the loan discharge component on the IBR plan while responding to court decisions over SAVE, impacting which periods count toward loan forgiveness.
- New repayment plans: President Trump's tax bill introduced two new payment plans: a revised standard plan and an income-driven plan. These will become available on July 1, 2026, providing additional repayment options for borrowers.
The changes to the SAVE plan have had a significant impact on federal student loan borrowers, with many facing uncertainty and higher interest costs. It is important for borrowers to stay informed about their repayment options and seek advice if needed.
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Student loan repayment plans
The SAVE Plan
The Saving on a Valuable Education (SAVE) plan, introduced by President Joe Biden in 2023, has faced legal challenges and changes. On August 1, 2025, the accrual of interest on loans under the SAVE plan resumed, impacting about 7.7 to 7.8 million borrowers with a total debt of nearly $440 billion. This plan was previously in forbearance with a 0% interest rate since July 2024 due to court rulings. Borrowers on the SAVE plan should be aware that their loan balances will grow with accruing interest, and they will be responsible for making monthly payments that include accrued interest and principal amounts. The Department of Education encourages borrowers under SAVE to transition to a legally compliant repayment plan, such as the Income-Based Repayment Plan or Income-Driven Repayment (IDR) plans, as they cannot access certain loan benefits or make progress toward loan discharge programs under SAVE.
New Repayment Plans and Caps
President Trump's tax bill introduced changes to the student loan repayment system, including two new payment plans: a revised standard plan and an income-driven plan. These plans will become available on July 1, 2026, and will be the repayment options for loans disbursed starting on that date. The new Repayment Assistance Plan (RAP) cancels loans after 30 years of payments, with base payments calculated as a percentage of adjusted gross income. The minimum monthly payment under RAP is $10. Additionally, there are now caps on direct unsubsidized loans, with a lifetime maximum of $257,500 per student for all loans, excluding the parent PLUS loan.
Available Resources
It's important to stay informed about your student loan repayment options and seek reliable resources for guidance. The Institute of Student Loan Advisors (TISLA) provides free advice for borrowers. The Student Debt Crisis Center offers resources and workshops, and the Student Loan Borrower Assistance project at the National Consumer Law Center also provides helpful tips. Some states, like New York, may have additional services to assist borrowers. The Federal Student Aid office maintains a list of frequently asked questions on its website. Additionally, experts like Travis Hornsby and Stanley Tate offer helpful resources and calculators on their websites.
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Loan forgiveness
The US Department of Education offers several loan forgiveness programs for federal student loans. Here are some key details about loan forgiveness:
- Public Service Loan Forgiveness (PSLF): PSLF forgives qualifying federal student loans after 120 qualifying payments (equivalent to 10 years) while working for a qualifying public service employer. This includes government jobs at the federal, state, local, or tribal level, as well as certain non-profit organizations. Only federal Direct Loans are eligible for PSLF.
- Income-Driven Repayment (IDR) Plans: Most federal student loans offer IDR plans that cap monthly payments based on income and family size. Depending on the specific IDR plan, the remaining balance on loans may be forgiven after 20 or 25 years of repayment. This includes periods of deferment, forbearance, and economic hardship.
- Repayment Assistance Plan (RAP): Introduced by President Trump, this plan cancels loans after 30 years of payments. The base monthly payments are calculated as a percentage of adjusted gross income, with a minimum of $10 per month.
- Loan Consolidation: Borrowers with certain types of loans, such as FFELP loans held by commercial lenders or Perkins loans not held by the Department of Education, can consolidate their loans into Direct Loans to become eligible for loan forgiveness programs. However, they must consolidate by a specified deadline, such as June 30, 2024, to benefit from certain adjustments.
It's important to carefully review the requirements and eligibility criteria for each loan forgiveness program. Additionally, seek official sources, such as the Department of Education's website, for the most up-to-date and accurate information.
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Income-driven repayment plans
The US Department of Education's Office of Federal Student Aid (FSA) has reopened the online income-driven repayment (IDR) plan and loan consolidation applications for borrowers. The application was temporarily paused to comply with the 8th Circuit Court of Appeals injunction, which directed the Department to stop implementing the Biden Administration's Saving on a Valuable Education (SAVE) Plan and parts of other IDR plans.
Borrowers can now apply for the Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR) Plans using the updated IDR application. The new Repayment Assistance Plan (RAP) cancels loans after 30 years of payments. Base payments are calculated as a percentage of adjusted gross income depending on income. The base rate is divided by 12, with $50 subtracted for each dependent to calculate the monthly payments. The minimum monthly payment is $10.
The SAVE plan, introduced by President Joe Biden in 2023, has been held up in courts. On July 9, the US Department of Education announced that the accrual of interest on loans under the SAVE plan would resume on August 1. The SAVE plan is an income-driven repayment plan that lowered the monthly payments of many, sometimes to $0. Borrowers under SAVE may make payments toward their interest without switching plans, but they cannot pay toward the principal and are not considered to be in repayment.
If your income situation has significantly changed, your loan will be put into administrative forbearance, which means your payment will be frozen until your application is processed (interest will continue to accrue). The Institute of Student Loan Advisors (TISLA) provides free advice for borrowers. The Student Debt Crisis Center has a resource center and holds workshops.
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Federal student loan collections
Tools and Methods
The US government has a range of tools to collect on defaulted federal student loans. These include seizing tax refunds, denying new federal student loans and grants, garnishing wages without a court order, taking a portion of Social Security payments, and charging high collection fees. These tools can significantly impact borrowers' financial situations and well-being.
Impact on Borrowers
The resumption of federal student loan collections can have a significant impact on borrowers. As of May 2025, there were over 5 million borrowers in default and an additional 4 million in late-stage delinquency. This means that almost 25% of the federal student loan portfolio was at risk of default. The US Department of Education's decision to resume collections, after a pause during the pandemic, will affect these borrowers' financial situations and their ability to repay their loans.
Options for Borrowers
Borrowers who have defaulted on their federal student loans have several options to resolve their default status. They can enter into a repayment agreement with their loan servicer, enrol in an income-driven repayment plan, or sign up for loan rehabilitation. Borrowers can also reach out to student loan advocates and ombudsmen to understand their options and rights. Additionally, the US Department of Education has stated that it will provide clear and timely communications to borrowers about their payment options and resources to assist them in selecting the best repayment plan.
Timeline of Changes
The US Department of Education announced in May 2025 that it would resume collections on defaulted federal student loans. This came after a pause on collections since March 2020 due to the pandemic. The Department also stated that it would restart the Treasury Offset Program, giving borrowers 65 days to resolve their default status before reporting to credit bureaus. Additionally, there have been recent changes to the student loan repayment system, with President Trump's tax bill introducing new payment plans and President Biden's SAVE plan facing legal challenges.
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Frequently asked questions
Interest on student loans under the SAVE plan resumed on August 1, 2025.
The US Department of Education announced that collections on defaulted federal student loans would resume on May 5, 2025.
If you are unable to begin repayment, your loan will be put in administrative forbearance, which means your payment will be frozen until your application is processed. Interest will continue to accrue during this time.
As of July 1, 2026, there will be two repayment plans available for new loans: the new standard repayment plan and the Repayment Assistance Plan (RAP).
