FILE-Demonstrators display signs of protest outside the U.S. Supreme Court, on June 30, 2023. (Photo by Tom Brenner for The Washington Post via Getty Images)
Borrowers are likely to see an increase in their monthly student loan payments as interest repayments renew on Friday.
The Department of Education announced on July 9 that it planned to restart charging interest for borrowers enrolled in the Saving on a Valuable Education (SAVE) plan, an income-driven loan relief program established by former President Joe Biden. The plan is used by over 7 million borrowers.
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In 2024, two courts issued injunctions against the SAVE plan, which stopped the program. But the Biden administration moved all the borrowers enrolled in the program into zero-interest forbearance, which means their loans were placed on hold and they weren’t accumulating interest.
How much will my student loans cost monthly with accrued interest?
Why you should care:
The Student Borrower Protection Center, an advocacy group for people with higher-education debt, estimates that a typical student loan borrower affected by the Aug. 1 student loan interest repayments will incur over $3,500 in unnecessary interest charges per year or roughly $300 per month.
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Student loan borrowers in the SAVE plan have the option to remain in forbearance, which means they won't need to make monthly payments; however, the total loan balance will increase with interest.
And if borrowers want to monitor how interest payments on their student loans will affect their monthly payments, they can review the loan simulator, and they can also explore repayment plans available on the Federal Student Aid website.
Trump’s ‘big beautiful’ bill includes a student loan repayment option
Big picture view:
A new student loan repayment plan called the Repayment Assistance Plan (RAP) is part of the "big beautiful" tax and spending bill signed into law by President Trump on July 4. The Repayment Assistance Plan will eventually replace the SAVE plan, the Income-Contingent Repayment (ICR), and the Pay As You Earn (PAYE) plan.
RAP also doesn’t protect a portion of a student loan borrower’s income like other income-driven repayment plans, and it will instead calculate their bill based on so-called adjusted gross income, which is your total earnings before taxes, excluding certain deductions.
The Associated Press reported that income-based repayment plans will continue to exist and provide student loan forgiveness after 20 or 25 years. But RAP will require 30 years of repayment before forgiveness is granted.
The Source: Information for this story was provided by Student Borrower Protection Center data, the Associated Press, and CNBC. This story was reported from Washington, D.C.