About 7.7 million people enrolled in a repayment plan being litigated will again accrue interest on their student loans, the Education Department announced Wednesday. Saving on a Valuable Education borrowers had been spared the interest for the past year while the federal government was in court trying to preserve the program in the face of legal challenges. They'll still be able to postpone payments, but the interest pause will go away on Aug. 1, the Washington Post reports.
"The Biden Administration used so-called 'loan forgiveness' promises to win votes, but federal courts repeatedly ruled that those actions were unlawful," Education Secretary Linda McMahon said in a statement Wednesday. "The Department urges all borrowers in the Save Plan to quickly transition to a legally compliant repayment plan." The 8th US Circuit Court of Appeals ruled the plan, enacted under the Biden administration, was illegal, per the Hill. Borrowers have remained in forbearance since the ruling, with no interest accrual and the possibility the forbearance could last another year.
The court order doesn't actually tell the Education Department to resume charging interest, per the Post. The court still hasn't ruled on the merits of a lawsuit challenging the program, and the department had been telling borrowers in forbearance that interest would not accrue until there was a change in the legal case. Department officials declined to explain the reason for acting now. President Trump's newly signed domestic policy bill closes the plan to new borrowers and gives existing ones until July 2028 to leave it.
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