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The Trump administration recently announced that federal student loans enrolled in the Saving on a Valuable Education (SAVE) plan will begin accruing interest on Aug. 1, 2025. If you wish to resume earning credit towards debt forgiveness, you may want to consider switching to the Income-Based Repayment (IBR) plan. If not, you can wait to see how the lawsuits play out or for the new Repayment Assistance Plan (RAP), which will be available in 2026.
Key Takeaways
- Starting Aug. 1, 2025, interest will be charged on SAVE loans, despite the program continuing to face legal challenges.
- The United States Department of Education is urging borrowers to switch to a different payment plan, but you can choose to remain in forbearance.
- If you decide to switch, you can select from three income-drive repayment (IDR) plans or wait until the Repayment Assistance Plan (RAP) becomes available in 2026.
What Are Your Options if You’re in the SAVE Plan Forbearance?
Option 1: Switch to a Different Income-Driven Repayment Plan
Despite the Saving on a Valuable Education (SAVE) program getting phased out, you still have income-driven repayment (IDR) options. The United States Department of Education has resumed processing applications for the following IDR plans:
- Income-Based Repayment (IBR): For qualifying loans, you’ll pay either 10% or 15% of your discretionary income (but never more than what you would pay under the 10-year standard repayment plan) over 20 or 25 years, respectively. The partial hardship requirements for IBR are being removed, so if you didn’t qualify previously, you may now be eligible.
- Income-Contingent Repayment (ICR): On qualifying loans, you’ll pay the lesser of 20% of your discretionary income or the amount you would pay on a fixed payment plan over 12 years, adjusted to your income. This plan has a repayment term of 25 years.
- Pay as You Earn (PAYE): If you have qualifying loans, your payments will be 10% of your discretionary income (but never more than what you would pay under the standard repayment plan). This plan has a repayment term of 20 years.
Fast Fact
Alongside SAVE, forgiveness as a feature of the ICR and PAYE plans is currently paused. However, payments that were made under any of these three plans may be counted toward IBR plan forgiveness, so long as the borrower eventually enrolls in IBR.
While borrowers can apply for the ICR or PAYE plans, the One Big Beautiful Bill Act has directed the Education Department to eliminate these plans (alongside SAVE) by July 1, 2028. Borrowers that remain enrolled in any of these plans by the time they’re gone will be automatically rolled into the newly proposed Repayment Assistance Plan (RAP) (this doesn’t apply to any Federal Family Education Loans (FFELs) or direct consolidation loans that repaid a parent PLUS loan, which will instead be moved to the IBR plan).
Important
The Big Beautiful Bill has also made it so that parent PLUS borrowers must consolidate their loans before July 1, 2026, and be enrolled in an IDR plan by July 1, 2028, to remain eligible for the IBR plan after the other options are eliminated. Failing to do so would eventually mean losing access to all IDR plans.
You can compare repayment options using the Office of Federal Student Aid’s Loan Simulator. To apply for any of these IDR plans, log into your Federal Student Aid account and submit an application.
Option 2: Do Nothing and Stay Enrolled in the SAVE Plan
You may have received an email from the Department of Education urging you to switch plans or prepare to repay your SAVE loans. However, even though interest starts accruing on Aug. 1, 2025, you aren’t required to make payments until the SAVE forbearance actually ends.
Again, the Department of Education has been directed to eliminate the SAVE plan by July 1, 2028. So, in theory, the forbearance may remain in effect until then, by which point a new administration (with a different student debt policy) may be in power. However, depending on how long it takes for the SAVE injunction to be resolved, the forbearance may end sooner.
Option 3: Switch to RAP
The Big Beautiful Bill introduced the Repayment Assistance Plan (RAP), which will be available in July 2026. This plan has a repayment term of 30 years, and monthly payments under it will be based on a borrower’s adjusted gross income (AGI), instead of their discretionary income, minus $50 per dependent.
Unlike other IDR plans, the RAP would require a minimum payment ($10) even from borrowers who earn below the federal poverty line. However, RAP will waive any interest not covered by the borrower’s monthly payment, and their principal balance will be reduced by up to $50 whenever their payments fail to do so.
Which Option Is Right for You?
None of these options are necessarily the “correct” one. Instead, certain options will make more sense depending on your financial situation and personal preferences.
If you’re close to qualifying for federal student loan forgiveness, either through your current IDR plan or Public Student Loan Forgiveness (PSLF), then it might be a good idea to switch to an IBR plan before Aug. 1. This way you can be debt free as fast as possible and won’t have to worry about what the future of federal student lending holds (unless you plan to go back to school or have children who will).
For other borrowers, given the uncertainty surrounding the Department of Education and IDR plans, it may be smarter to wait until it’s clear when the SAVE forbearance will actually end and then make a plan to switch to IBR beforehand. Meanwhile, if you’re able to do so, you can put the money you would’ve spent on your student loan payments somewhere it’ll grow, such as a high-yield savings account or a certificate of deposit (CD). That said, you may also wish to pay off any interest that accrues before leaving SAVE so it won’t be added to the principal balance.
Tip
Under the IBR plan, if your income eventually increases so that you no longer qualify to make income-based repayments (meaning your payments will then equal what you’d be paying under the standard repayment plan), you can still qualify forgiveness. However, due to your larger monthly payment, you may end up paying off the full balance before the end of the IBR plan’s repayment term.
Unless you’re fairly certain that your income will remain sufficiently low during the entire repayment term, letting any interest capitalize would likely mean paying more than you have to and that your monthly payments could be harder to afford (despite your increased wealth).
Because it scales with AGI instead of discretionary income, RAP is likely to be a more expensive option for most borrowers, especially low-income ones. However, it may be a good fit for certain people, so you might want to at least stick with SAVE until RAP becomes available in 2026, as then you can make a clearer comparison between what you’ll pay under it versus IBR.
The Bottom Line
Before interest starts accruing for student loans enrolled in SAVE, it’s a good idea to educate yourself about the changes to the program so you’ll have a clear idea of how to avoid defaulting on your student loans. You could enroll in IBR, wait for the new RAP to become available, or hold out until the SAVE forbearance ends. Consider speaking with a personal financial advisor to help determine which will be the best option to suit your needs.
