When and Why Interest Resumes
After a federal injunction struck down parts of the SAVE plan, servicers will begin charging interest again on impacted loans as of August 1, 2025. This action follows an Eighth Circuit ruling in February 2025 and a district court injunction in April requiring the Department of Education to restore interest on affected accounts :contentReference[oaicite:0]{index=0}.
What It Means for Your Payment
With interest back on the books:
- Monthly payments may jump by about $300 on average—adding roughly $3,500 in interest over a year :contentReference[oaicite:1]{index=1}.
- Unpaid interest will capitalize when your next income recertification hits, increasing your principal balance.
- New standard rates for 2025–26: 6.39% for undergraduates, 7.94% for graduate/professional borrowers, and 8.94% on Parent PLUS loans :contentReference[oaicite:2]{index=2}.
Three Steps to Take Today
- Check Your Servicer Dashboard
Log in and note any new “Interest Charged” line items for July and August. - Pay the Accruing Interest
Even an interest-only payment stops your balance from growing. - Compare Repayment Plans
Review SAVE, REPAYE, and the upcoming Repayment Assistance Plan (RAP) launching in 2026. Early budgeting for RAP’s lower payments can ease the transition.
Key Takeaways:
- Federal student loan interest pauses under the SAVE plan ends August 1, 2025.
- The average borrower could see payments rise by roughly $300/month (about $3,500/year).
- Immediate steps—checking your servicer statement, paying interest, and exploring plans—can limit balance growth.
Peeking Ahead: Policy Changes on the Horizon
Congress is also debating broader student-loan reforms. One proposal would cut rates to 2% and allow refinancing of private loans at government rates :contentReference[oaicite:3]{index=3}. Meanwhile, the “One Big Beautiful Bill” package (effective July 1, 2026) would sunset existing income-driven plans like SAVE and REPAYE by 2028, replacing them with a simpler structure under RAP.