Aug 18, 2025
Back-to-school season has kicked off with anxiety for more than 42 million people carrying federal student debt. The federal government holds 91.6% of all student loans in the country.
President Donald Trump is shutting down the SAVE (Saving on a Valuable Education) program, established in 2023 under the Biden administration. SAVE paused interest on federal student loans as long as borrowers continued to pay down the principal, and forgave the debt entirely after 10 years.
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No more forgiveness. As Forbes reports. On Aug. 1, the clock started ticking again on federal student loan interest.
According to the U.S. Department of Education, this affects 42.7 million borrowers, each with an average student debt of $39,075 — totalling an estimated $1.6 trillion.
If you’re one of them, this is what you need to know about the changes, and how to manage your payments going forward.
Debt relief over, more defaults may follow
SAVE allowed borrowers to make payments based on income and suspend payments if they didn’t earn sufficient money. For those with undergrad degrees, payments were capped at 5% of discretionary income.
The program encouraged borrowers to make regular loan payments by freezing interest as long payments were made monthly — and fully forgave federal student debt after 10 years of regular payments.
It was a relief to millions of Americans who saw their federal student loan debt balloon due to interest over the years — with as many as five million in default on their payments in April 2025 and another 4 million in late-stage delinquency, close to defaulting.
Those numbers are likely to grow due to the changes outlined in Trump’s One Big Beautiful Bill Act. Even if borrowers make regular payments on their student debt, interest is accumulating.
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According to CNET, a borrower earning $60,000 a year could see their $217 monthly payments on a $30,000 student loan under SAVE jump by an additional $100 per month under the Trump administration's student loan plans.
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How to budget for student loans
Administratively, borrowers can keep their student loans under the SAVE program until July 1, 2028 — but must still pay interest. In 2028 they will have to transition over to the Standard Repayment Plan or Repayment Assistance Plan (RAP).
The government is updating information on various student loan repayment plans to reflect the new policies. Keep checking back on the Federal Student Aid website to be sure you have the most up-to-date info.
For those aiming for 10-year loan forgiveness, staying in forbearance may be the best option. Under this plan, you can claim the months your loans were on hold using a process called PSLF buy-back. As long as you make the payments once your term is over, the months of forbearance will count towards your 120 on-time payments for the forgiveness program.
Those who choose to switch plans now should know that there’s currently a backlog in processing student aid forms. Their application may be delayed by a few months.
With so many new rules, borrowers may want to consider seeking the advice of a student aid advisor to be sure they understand the new requirements for repayment programs, and can pick the option that suits their budget and goals for relaying their loans on time.
Depending on your overall financial situation, you may want to speak to a financial advisor to explore other options, like debt consolidation based on your income, monthly budget and additional debt.
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Rebecca Holland is dedicated to creating clear, accessible advice for readers navigating the complexities of money management, investing and financial planning. Her work has been featured in respected publications including the Financial Post, The Globe & Mail, and the Edmonton Journal.
