A Crisis Reignited: Student Loan Interest Set to Resume August 1 for Millions of Borrowers

Washington, D.C. – July 11, 2025

The burden of student debt in America is once again deepening. After a year-long freeze on interest for borrowers enrolled in the federal SAVE (Saving on a Valuable Education) Plan, the U.S. Department of Education has confirmed that interest charges will resume on August 1 for nearly 7.7 million Americans. This change, triggered by a federal court ruling in early July, is expected to have far-reaching financial consequences for working families, recent graduates, and lower-income communities already struggling under the weight of rising costs and economic uncertainty.

The SAVE plan, introduced by the Biden administration and implemented in 2023, was designed to provide relief through income-driven repayment, lower monthly bills, and—crucially—a 0% interest provision for those making timely payments. That interest subsidy, now stripped away by legal challenge and policy rollback under the Trump administration, is set to cost the average borrower an estimated $3,500 in added debt per year, according to data from the Education Department and the Congressional Budget Office. Borrowers with larger balances could see even steeper accruals—up to $8,000 or more annually—turning what was meant to be a pathway to stability into a financial trap.

The decision comes amid a wider effort by the Republican-led Congress and President Trump’s White House to overhaul federal loan policies. Under the recently passed “One Big Beautiful Bill”, several income-driven repayment (IDR) plans, including SAVE and PAYE, are being phased out entirely by July 2026. A new program, dubbed the Repayment Assistance Plan (RAP), will replace them—but many worry it offers fewer protections and more burdens. Advocacy groups and economists have warned that this transition will leave millions without clear guidance or adequate options, especially given the Education Department’s current backlog of 1.6 million applications for IDR processing.

Worse yet, this change comes at a time when delinquency rates are already surging. Recent figures from TransUnion and the Consumer Financial Protection Bureau (CFPB) show that more than 5.6 million borrowers were behind on payments as of June 2025—more than double the rate in 2019. For many borrowers, these payments are not just inconvenient—they’re destabilizing. Wage garnishments, intercepted tax refunds, and frozen Social Security checks are back in effect, disproportionately affecting older Americans and low-income borrowers, particularly Black and Latino communities.

According to a study by the National Consumer Law Center, nearly 1 in 3 SAVE plan borrowers will likely struggle to stay current once interest resumes. Many of these individuals work in public service, education, or healthcare—fields that were once promised loan forgiveness programs that have since been slashed or restructured under recent budget realignments.

This situation has reignited a national debate about the role of education financing in a just society. Is it justifiable for the government to profit off student debt? Should people be punished financially for pursuing education in a country that claims to value upward mobility? At the People’s Rights Organization, we say: absolutely not. Education should be a right, not a lifelong debt sentence.

The implications of this policy reversal are not just economic—they’re generational. Young people entering adulthood in 2025 are now being met with broken promises and bureaucratic obstacles. Many graduated into a pandemic economy, saw repayment freezes bring temporary hope, and are now being pushed back into debt just as they begin to build careers and families. This is not sustainable, and it is not moral.

The Department of Education has urged borrowers to explore other repayment options, such as Income-Based Repayment (IBR) or the revised Standard Plan, using the federal Loan Simulator tool. But these plans still allow interest to accrue and do not offer the protections that SAVE once did. Additionally, many borrowers have reported delays, glitches, and misinformation when trying to switch plans or contact loan servicers—further evidence that the system is not built with human dignity in mind.

In response to this crisis, we at P.R.O. are calling on our community—and the nation—to act. We demand that Congress launch immediate hearings into the economic and legal implications of the SAVE plan’s rollback. We support emergency legislation to reinstate the 0% interest rate for vulnerable borrowers until a more just long-term plan can be adopted. And we urge young people, especially students and recent grads, to organize teach-ins, contact their representatives, and participate in national days of action focused on debt abolition and educational justice.

This moment is bigger than interest rates. It is about whether America values its future enough to invest in it—or whether it will continue forcing its citizens to mortgage their lives just to earn a degree. On August 1, when the clock starts ticking again for millions, we need to make sure our voices are louder than ever.