The Department of Education is urging borrowers to switch to income-based repayment plans, such as the Income-Based Repayment Plan and the new Repayment Assistance Plan (RAP), which will be available until July 1, 2026, to avoid accruing interest and manage their student debt more effectively.

Legal challenges from Republican-led states resulted in a federal judge pausing the Biden administration's SAVE program in February 2025, during which interest rates were temporarily set to 0%, but the program remains blocked due to ongoing litigation.

In May 2025, approximately 5 million Americans with defaulted student loans had their loans sent to collections for the first time since the pandemic-related payment pause.

Starting August 1, 2025, around 8 million borrowers, including 7.7 million on the SAVE plan, will see their interest charges resume after a yearlong pause, which will cause their loan balances to increase, although interest will not be applied retroactively.

The resumption of interest is expected to raise monthly payments for many borrowers, with estimates suggesting an increase of nearly $100 for a typical borrower earning $60,000, and an additional $3,500 annually in interest costs.

Borrowers facing higher payments are advised to consider economic hardship deferment or interest-only payments, especially those unable to afford the increased costs.

The Department of Education is experiencing a backlog of nearly 2 million applications for income-driven repayment plans, which may delay plan switching and affect the start of payments for some borrowers.

There is ongoing debate and criticism surrounding student loan forgiveness and repayment reforms, with the Department emphasizing efforts to simplify the process and critics warning about mismanagement and increased financial burdens.

Legislation signed by President Trump terminates current student loan repayment plans like SAVE for loans disbursed on or after July 1, 2026, replacing them with a standard plan and a new income-based Repayment Assistance Plan, prompting the Department to support borrowers in transitioning to these new options.

The Biden-era SAVE plan, introduced in 2023 to reduce monthly payments and offer loan forgiveness, has been blocked in court since July 2024, leading borrowers to remain in forbearance without interest accruing during that period.

Borrowers are encouraged to review their repayment options carefully, especially those seeking Public Service Loan Forgiveness, as application backlogs and legal changes may complicate their plans.

The upcoming Repayment Assistance Plan, set to begin on July 1, 2026, will require monthly payments of 1% to 10% of income, but critics warn it may disadvantage lower-income families.