Student Loans Are About to Become More Expensive for Some Borrowers

8/6/2025

Stressed out young woman looking at phone.

Even if you're not a federal student loan borrower, you probably recall the broad strokes of the past few years:

Federal student loans went into forbearance during the COVID-19 pandemic
Then-President Biden attempted to implement a substantial student loan forgiveness program
That loan forgiveness program was blocked in the courts and ultimately never came to be
The SAVE plan was launched in 2023 as a more affordable income-driven repayment option that could help borrowers get out of debt faster
Because the SAVE plan was immediately in legal limbo, the 8 million borrowers who enrolled on the plan were eligible for interest-free forbearance until the plan went into effect

Effective August 1, 2025, interest is now being charged on borrowers in forbearance through the SAVE plan.

What does this mean for student loan borrowers?

For student loan borrowers who signed up for SAVE, you can keep your loans in forbearance, but they're going to become more and expensive as interest charges begin accruing.

According to an analysis by the Student Borrower Protection Center, the average borrower enrolled in SAVE can expect to be charged an estimated $300 per month in interest.

In other words, if you've been relying on SAVE to put off the costs of student loan debt while you focus your money elsewhere, you'll need to reassess your student loan repayment strategy quickly.

What should those impacted do?

If you're on SAVE, your best course of action is most likely to switch to another income-driven repayment plan. There are none with terms as affordable as SAVE, but any plan is likely to be better than just letting your balance grow thanks to interest charges. Considering working with a student loan counselor to determine the best plan for your situation.

There may, however, be some scenarios where staying on SAVE makes sense, given that the payment pause for SAVE borrowers is still in effect. If you've got a lot of unsecured credit card debt, for instance, the cost of interest charges on those accounts is likely higher than the interest being charged for your student loans. In that case, you may want to stay on SAVE and focus on finding a debt relief program that gets you out of debt before SAVE is replaced entirely in 2028.

Need help getting out of debt quickly? The debt management plan from MMI can have you out of debt in as little as 24 months and save you a massive amount of money in the process thanks to average interest rates below 7%.

Tagged in Student loan options, Debt strategies

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

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