Student loan borrowers across the United States are facing a wave of uncertainty and financial strain as sweeping changes to federal repayment programs and borrowing limits begin to take effect. The landscape, shaped by a series of court battles, legislative reforms, and administrative shifts, is poised to impact millions—especially those who have relied on the now-defunct SAVE plan and those planning to pursue advanced degrees in the coming years.
On July 9, 2025, the Department of Education announced a pivotal change: federal loans enrolled in the SAVE (Saving on a Valuable Education) plan would start accruing interest again as of August 1, 2025. According to Bankrate and higher education expert Mark Kantrowitz, this move will immediately affect approximately 8 million borrowers, many of whom enrolled in SAVE specifically because it offered the most generous terms among income-driven repayment plans. For these borrowers, the end of interest-free forbearance means their loan balances will begin to grow—sometimes rapidly—if they do not act soon.
This shift did not happen overnight. The Biden Administration first implemented the interest-free forbearance in July 2024, following a volley of legal challenges from several states. The forbearance was extended in October 2024. However, federal courts blocked SAVE and related forgiveness programs in early 2025, paving the way for the Trump Administration to announce the end of the interest-free period this July. The Trump Administration has since urged SAVE enrollees to switch to the Income-Based Repayment (IBR) plan, which, while still available, comes with higher monthly payments—especially for undergraduate borrowers whose obligations could double.
The financial impact of these changes is not distributed evenly across the country. Data from the Student Borrower Protection Center shows that borrowers in 11 states—including the District of Columbia, Maryland, Georgia, and California—will see at least $300 in monthly interest accrue, or $3,600 annually, while they remain on SAVE or until they switch plans. In D.C., the monthly interest could reach $434, totaling over $5,200 a year. Meanwhile, borrowers in states like Iowa, North Dakota, and Wisconsin will face up to $250 in monthly interest, or nearly $3,000 annually. As Kantrowitz told CNBC, “The risk is that interest can continue to accrue during these pauses, making balances even harder to manage long-term.”
These numbers are not just abstract. Between April and June 2025, roughly 10.3 million federal student loan borrowers were enrolled in forbearance—a sharp jump from 2.9 million during the same period the year before. Another 3.4 million had deferred their payments, up from 3.2 million in 2024. The combined total means that more than a quarter of the country’s 40 million-plus federal student loan borrowers had their repayment progress suspended in the third quarter of 2025, according to Education Department data analyzed by Kantrowitz.
The reasons for these increases are complex but closely tied to the SAVE plan’s tumultuous fate. When SAVE was rolled out, it was seen as a lifeline for struggling borrowers. The plan’s lower payments—just 5 percent of discretionary income for undergraduate loans—were a marked improvement over previous options. For example, a borrower earning $75,000 would pay $166 a month under SAVE, compared to $429 under IBR. But as lawsuits mounted and the Trump Administration’s Big Beautiful Bill (BBB) repealed the plan in summer 2025, millions found themselves in limbo. Many SAVE borrowers were placed in forbearance during the legal wrangling, but now, under the new rules, that forbearance accrues interest.
What’s more, getting out of this limbo is no easy feat. As of late July 2025, the Education Department reported a backlog of over 1.3 million applications from borrowers trying to switch to income-driven repayment plans. This administrative bottleneck means many are stuck in costly forbearance, unable to access more manageable repayment options. Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York, told CNBC, “The student borrowers for whom the SAVE plan was the only affordable option will be severely impacted by these changes.”
The consequences of paused payments and mounting interest are already visible. The number of borrowers in economic hardship deferment doubled from 50,000 in the third quarter of 2024 to 100,000 in 2025. Unemployment deferments also rose, from 140,000 to 180,000. For a typical federal student loan borrower—with an average balance of $39,000 and an interest rate of about 6.7%—debt can grow by $219 a month in interest alone during forbearance, Kantrowitz calculated. “For many, it becomes a cycle that delays financial milestones like saving for retirement, buying a home or starting a family,” said Douglas Boneparth, president of Bone Fide Wealth and member of the CNBC Financial Advisor Council.
For those who remain on SAVE, the future is even murkier. The plan, which once offered a shorter route to forgiveness (10 or 15 years for lower debt amounts), is expected to be phased out entirely before July 1, 2028. At that point, all federal loan borrowers will have to enroll in plans created or retained by the BBB. New federal loans taken after July 1, 2026, will not be eligible for IBR; instead, borrowers will be placed in the new Repayment Assistance Plan (RAP), which is designed for lower-income borrowers but will result in higher payments—about $2,929 more annually for degree-holders compared to SAVE, according to a June analysis by the SBPC.
The BBB’s changes go beyond repayment plans. Starting July 1, 2026, borrowing limits will be sharply curtailed: graduate students will be capped at $20,500 annually with a $100,000 lifetime limit, while professional degree students (like those in law or medicine) will face a $50,000 annual cap and a $200,000 lifetime maximum. Parent PLUS loans will be limited to $20,000 per year and $65,000 total per child. The total borrowing ceiling across all federal loan programs (excluding Parent PLUS) will stand at $257,500. This is a dramatic departure from the current system, where students and families could often borrow up to the full cost of attendance.
Supporters of these caps argue they are necessary to curb tuition inflation and prevent unsustainable debt. Critics, however, worry that the new limits will make it harder for low- and middle-income students to access expensive graduate and professional degrees. An Urban Institute analysis cited by Bankrate found that more than half of dental students and about 40 percent of medical students currently borrow above the new thresholds. Students in fields like fine arts, public health, and social work will also be affected, as will about 30 percent of families who rely on Parent PLUS loans.
For now, Education Secretary Linda McMahon is urging SAVE borrowers to switch to IBR to avoid unaffordable payments under the Standard plan or the not-yet-available RAP. But with administrative delays, growing interest, and major legislative changes on the horizon, the path forward is anything but clear for millions of Americans seeking relief from student debt.
The next few years will test the resilience of borrowers and the adaptability of the higher education financing system. The choices made now—by individuals and policymakers alike—will shape the financial futures of a generation.
