Student Loan Forgiveness Delayed, Interest Resumes: What Advisors Must Know in August 2025

Editor’s note, August 2026. This post reported the situation as it stood in July 2025 and is kept for the record. Much of it has since been overtaken: the SAVE plan was vacated by the Eighth Circuit on March 10, 2026 and no longer exists, the Repayment Assistance Plan became the default on July 1, 2026, and PAYE closed to new enrollment on June 30, 2026. For the current picture, see Clients Still on SAVE: The 90-Day Playbook and RAP or IBR? The Decision Framework.

Millions of borrowers are stuck in limbo with rising balances and delayed relief as new changes take hold. IBR forgiveness is paused, SAVE Plan interest resumes August 1, and processing delays are piling up. Advisors need to act now to reassess repayment strategies and protect client progress. Finology Software makes it easy to identify impacted borrowers, model alternatives, and deliver clear, proactive guidance.

Student loan forgiveness under the Income-Based Repayment (IBR) plan has hit an unexpected roadblock. The Department of Education has paused forgiveness processing under IBR, despite the program being established law and not directly impacted by recent court rulings.

This sudden halt affects borrowers who have faithfully made payments for 20 or 25 years and expected debt cancellation. Instead, they’re left in limbo – either continuing payments or being forced into forbearance, where interest accrues and balances rise.

To make matters worse, the Department is also juggling a backlog of over 1.5 million repayment plan applications as it prepares to phase out most existing plans in favor of a new option that delays forgiveness until 30 years of repayment.

Client Action: Review which of your clients are enrolled in IBR or other Income-Driven Repayment (IDR) plans and notify them of this development. Be prepared to discuss temporary forbearance risks and long-term strategy adjustments.

Interest Resumes August 1st for SAVE Plan Borrowers

Millions of borrowers on the Saving on a Valuable Education (SAVE) Plan will see interest charges resume August 1, following a legal ruling that blocked core provisions of the plan.

SAVE was designed to cap payments based on income and create a clearer path to forgiveness. But for the past year, due to court challenges, borrowers were stuck in a frozen state, unable to make payments and assured that interest would remain paused.

That changes now.

With just weeks’ notice, interest will begin accruing again, and many borrowers are left scrambling. Switching to another IDR plan requires an application and with limited Department staff, processing delays continue.

Client Action: Alert clients on SAVE or considering SAVE. Review their current repayment plan and explore alternatives before interest begins compounding again.

What happened next

The delays described above were not resolved so much as overtaken. SAVE was struck down outright, its enrollees were given 90 days to choose another plan, and the plan menu itself was rewritten. Borrowers who were waiting in 2025 for forgiveness to resume spent the intervening year in a system that changed underneath them.

The durable lesson is the one that survived every version of these rules: a borrower who waits for the situation to clarify is making a decision, and it is usually the expensive one. The clients who came through this well are the ones whose advisor re-modeled their options each time the ground moved.

Model a client’s current options at finology.tech, or log in if you already have an account.