The Education Department will soon begin to charge interest on student debt for an estimated 7.7 million borrowers who’ve been in legal limbo since a repayment plan created by President Joe Biden was blocked in court.
The interest charges for people enrolled in the Saving on a Valuable Education, or SAVE program, will begin on Aug 1, according to an Education Department official, although, for now, borrowers do not have to resume making loan payments.
The department plans to encourage affected borrowers to switch to other repayment plans currently offered by the Trump administration, the official said, adding that an announcement regarding the interest payments will be made on Wednesday.
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Under the SAVE program, some low-income borrowers were allowed to make zero-dollar monthly payments and could get their debt forgiven after a maximum of 25 years in repayment.
The program, along with other Biden administration debt-relief initiatives, quickly ran into fierce opposition from conservatives. An appeals court last year blocked the SAVE plan after a lawsuit was filed by a Republican-led coalition of states. While the legal questions are being resolved, borrowers have not had to make payments or pay interest.
The borrowers still remain in a so-called general forbearance period. According to guidance issued by the Education Department in January, they were also not expected to see payments due again until December at the earliest. However, with interest charges about to return, some may opt to enroll into a new plan sooner to avoid seeing their debt grow while court proceedings continue to play out.