By: Sean Gallagher, CFP®
If you're enrolled in the federal SAVE (Saving on a Valuable Education) student loan plan, significant changes have occurred, and more are coming. As of August 1, 2025, interest again accrues on federal loans held under the SAVE plan, marking a significant shift from the previous 0% interest period many borrowers have relied on since the pandemic.
What changed? What's still to come? How can borrowers make informed decisions about their student loans moving forward?
1. Interest Is Accruing Again—Even If You're Not Making Payments
For the last several months, borrowers in SAVE administrative forbearance have benefited from 0% interest, even though they weren't required to make payments. That changed on August 1, 2025, and interest is now being charged again, even if you're still in forbearance.
While your payments might still be paused, your loan balance is not. Interest is now added to the amount you owe daily, which could increase your balance by several hundred dollars per month, depending on your loan size and interest rate.
2. Time in SAVE Forbearance Doesn't Count Toward Public Service Loan Forgiveness (PSLF)
Another critical update: if you're working toward Public Service Loan Forgiveness (PSLF), months spent in SAVE's administrative forbearance do not count toward the required 120 qualifying payments.
That means that if you're a teacher, nurse, nonprofit employee, or government worker relying on PSLF, remaining in the SAVE plan could delay your forgiveness timeline. You'll need to switch to a qualifying income-driven repayment plan where your payments actively count to stay on track.
3. The SAVE Plan Is Being Phased Out
Under the new legislation passed in July 2025, the federal government is phasing out the SAVE plan and other income-driven plans like PAYE and ICR. After July 1, 2026, no new borrowers can enroll in SAVE, and by 2028, it will be eliminated.
Replacing it is a new program called the Repayment Assistance Plan (RAP), which becomes available in July 2026. RAP will base payments on your adjusted gross income, with sliding scale contributions ranging from 1% to 10%. It will also include incentives like interest subsidies and a modest principal match for on-time payments. Unlike SAVE forbearance, RAP will count toward PSLF if you're eligible.
Should You Stay in SAVE or Switch Now?
Every borrower's situation is different, but here's a simplified decision guide to help you think through your options:
If you're working toward PSLF:
You should consider switching out of SAVE and into a qualifying income-driven plan like IBR (Income-Based Repayment) or PAYE. These plans will resume your payment progress toward forgiveness and ensure your months continue to count.
If you're not pursuing PSLF and your income is low:
You might stay in SAVE's administrative forbearance until RAP becomes available in July 2026. Remember that interest is now accruing, so your balance will grow. Making interest-only payments could help limit that growth if you can afford it.
If you're looking for stability and a long-term plan:
RAP may offer a good option once it launches in 2026, especially for those with low to moderate incomes. But you'll need to prepare for it in advance and weigh whether switching earlier to an income-driven plan could benefit you now.
Steps to Take Now
Log in and review your loan information.
Check your servicer's website or log in to StudentAid.gov to confirm your current status, servicer, and interest accrual. Make sure your contact info and income details are up to date.If PSLF is your goal, take action.
Don't let months go by without progress toward forgiveness. Switching out of SAVE now is your best bet to keep your timeline intact.Consider paying down interest.
Even small monthly payments toward interest can help you avoid growing balances. If your monthly interest is $200–$300, paying that amount now can save you thousands in the long run.Start budgeting for RAP.
If you're planning to enroll in the new RAP program in 2026, begin estimating what your monthly payments might look like based on your income. This will help you avoid surprises and stay on track financially.
Final Thoughts
The SAVE plan once offered generous protections, but those are quickly disappearing. With interest now accruing and PSLF eligibility off the table for those in forbearance, it's more important than ever to reevaluate your student loan strategy.
Whether you're pursuing forgiveness, trying to avoid growing debt, or just looking for the most manageable repayment option, now is the time to make a plan. If you're unsure what move is best for your situation, contact your HIGHLAND team member to discuss aligning your student loan decisions with your broader financial goals.
Sean Gallagher is a CERTIFIED FINANCIAL PLANNER™ at HIGHLAND Financial Advisors, a Fee-Only financial planning firm that offers comprehensive financial planning, retirement planning, and investment management. Sean graduated from Virginia Tech’s financial planning program in 2018 and successfully passed the CFP® national exam in 2019. As a Financial Planner at HIGHLAND Financial Advisors, Sean works on developing comprehensive financial plans and investment management for all clients.
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The above article was written with the assistance of artificial intelligence (AI).