Interest will restart for SAVE borrowers whose loans remain in a general forbearance on August 1. Viva Tung / CNET
Federal student loans for those who are enrolled in the Saving on a Valuable Education plan have been in an interest-free forbearance for a year while the income-driven repayment plan was challenged in court. Although SAVE has been officially blocked in the courts, borrowers' loans are still in limbo. Now, borrowers are being encouraged to choose a new payment plan or face interest charges.
The Department of Education announced on July 9 that student loans for borrowers in the SAVE plan would start accruing interest on August 1. Their loans, however, will remain in a general forbearance.
To avoid interest charges, the Department of Education is encouraging borrowers to switch to another payment plan.
"The Department urges all borrowers in the SAVE Plan to quickly transition to a legally compliant repayment plan -- such as the Income-Based Repayment Plan," Secretary of Education Linda McMahon said in a statement.
You're not required to switch payment plans at this time, however. What you should do depends on your forgiveness options and financial situation.
"It's crucial for borrowers to act based on their own personal situation," said Elaine Rubin, a student loan policy expert and director of corporate communications at Edvisors. "A borrower who chooses to stay in the forbearance or who is waiting for their payment plan application to be processed will have their loan remain in good standing."
SAVE borrowers have already been through unprecedented policy changes that have left many without a student loan payment for over five years. If you're a borrower enrolled in SAVE and you're not sure what to do next, here's what experts suggest.
What should PSLF borrowers enrolled in SAVE do?
If you're working toward Public Service Loan Forgiveness and are enrolled in SAVE, you can either stay in forbearance or switch to another repayment plan.
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