As of August 1, interest accrual on federal student loans under the Saving on a Valuable Education (SAVE) plan will recommence for approximately 8 million borrowers whose loans are still in general forbearance. Although monthly payments remain suspended, borrowers are urged to review their options regarding repayment plans before this change takes effect. The situation is particularly critical for borrowers seeking to manage their finances effectively amid shifting policies. Education Department officials emphasize that borrowers must act according to their personal financial situations, especially as the timeline for resolving backlogged payment applications may extend into 2026.
For those pursuing Public Service Loan Forgiveness (PSLF), there are options to stay in forbearance or transition to another repayment plan. This is particularly beneficial because months spent in forbearance can be counted toward the required 120 payments for forgiveness through a mechanism known as PSLF buy-back. Borrowers can take advantage of this provision by choosing to delay payments while remaining proactive. The processing delays for transitioning repayment plans mean that borrowers could wait weeks or even months before their first payment under a new plan is due.
Aligning repayment strategies can be especially vital for those seeking income-driven repayment forgiveness. Experts recommend that such borrowers weigh their options and potentially switch to a different plan, as months spent in forbearance won’t contribute toward achieving forgiveness if they do not act promptly. Those who wait risk prolonging their repayment term and ultimately facing higher total costs. The Federal Student Aid loan simulator is a helpful tool for assessing different income-driven repayment options and determining individual financial impacts.
Borrowers without access to loan forgiveness options face their own set of choices. They may remain in forbearance or switch to a different income-driven repayment plan, but they should brace for upcoming payments. Experts recommend making larger lump-sum payments while interest is temporarily frozen as a proactive strategy. Borrowers should be vigilant about analyzing their repayment options and making thoughtful decisions that align with their financial capabilities.
While borrowers in the SAVE plan generally qualify for other income-driven repayment options, they might encounter challenges as new requirements are instituted. Currently, there are adjustments being made, particularly regarding the elimination of certain hardships necessary for Income-Based Repayment (IBR) qualification. System updates are expected, but borrowers are encouraged to seek the best available repayment option in the interim, including a potential extension in general forbearance.
Lastly, those considering a switch to a new repayment plan should prepare for a possible increase in their monthly payments. The SAVE plan was notably affordable, and many low-income borrowers benefitted from minimal or nonexistent payments. Transitioning to a different plan, such as IBR, could result in a payment increase, which underscores the importance of assessing one’s financial readiness for these changes. The forbearance period currently anticipated to last until mid-2026 provides a temporary buffer for borrowers, but it is crucial to remain informed about any potential changes arising from ongoing legal proceedings.
