Published: December 17, 2025
The notification didn’t say “Payment Due.” It said something far more confusing: “Interest Accrual Restart.”
For over a year, millions of borrowers on the SAVE plan sat in a protective holding pattern. Federal courts had blocked the plan, but the Department of Education kept accounts in a 0% interest administrative forbearance. You didn’t have to pay, and your balance didn’t grow.
That safety net has dissolved.
Following recent legal developments, including the 8th Circuit Court of Appeals rulings and subsequent implementation steps, the rules governing this holding pattern have shifted.
The “parking spot” where millions of loans were sitting is no longer free. Interest is now accruing daily for many borrowers still attached to the SAVE infrastructure.
To stop this balance growth, borrowers are facing increasing financial pressure to exit SAVE and move to older, less favorable plans like IBR (Income-Based Repayment) or PAYE (Pay As You Earn).
This analysis reflects reported MOHELA servicing practices and federal loan regulations as publicly available through late 2025.
The End of the 0% Interest Shield
The most critical change is the removal of the 0% interest subsidy for the SAVE litigation forbearance.
Previously, while the courts reviewed the legality of the SAVE plan, the Department of Education used its authority to zero out interest accumulation.
However, recent court orders have constrained this authority, reflecting ongoing SAVE plan litigation. Beginning in mid-to-late 2025, interest began accruing on many SAVE-flagged accounts that remain in administrative forbearance.
This creates a “silent” debt increase. A borrower with $50,000 in loans at 6% interest is now seeing their balance grow by roughly $250 per month, even though their required payment remains $0.00.
The “Zombie” Plan Status
Technically, borrowers are not being “kicked off” the SAVE plan instantly. They are stuck in a zombie status.
The plan exists on paper, but it cannot function. It cannot process new payments, it cannot forgive interest, and it cannot count toward forgiveness milestones under the original terms.
Because the plan is legally paralyzed, servicers cannot generate a valid monthly bill under SAVE rules.
This leaves borrowers in a Catch-22:
- Stay in SAVE: Pay $0 now, but watch the loan balance balloon due to interest, and earn no credit toward forgiveness.
- Leave SAVE: Voluntarily enter a repayment plan with higher monthly payments to stop the interest growth and resume forgiveness progress.
The Rush to Switch Plans
Millions of borrowers are now attempting to exit this “zombie” status simultaneously.
To resume making qualifying payments for Public Service Loan Forgiveness (PSLF) or simply to cover accruing interest, borrowers must apply to switch to a different Income-Driven Repayment (IDR) plan.
This mass migration has triggered a processing backlog.
When a borrower submits an application to switch from SAVE to IBR, the account often moves from “Litigation Forbearance” to “Processing Forbearance.”
Interest typically accrues during this processing period for unsubsidized loans.
The “Paper Application” Bottleneck
Compounding the delay is the method of application.
For much of late 2024 and 2025, the electronic IDR application tool on StudentAid.gov was frequently paused or limited due to litigation compliance updates.
This forced many borrowers to submit paper PDF applications via upload or mail.
Paper applications require manual review by servicer staff. This manual workflow is significantly slower than the automated system, extending processing times from weeks to months.
What Happens to Your Payments Next?
If you choose to switch plans, your future payments will likely look different than your SAVE calculation.
The SAVE plan used a formula based on 225% of the federal poverty guideline and, for undergraduate loans, a proposed 5% discretionary income cap.
The alternative plans (IBR and PAYE) typically use 150% of the poverty guideline and a 10% to 15% discretionary income cap. Comparisons with SAVE plan alternatives highlight how different these formulas can be.
For many borrowers, switching away from SAVE results in a significantly higher monthly payment requirement.
Additionally, the interest subsidy benefits of IBR and PAYE are less generous than SAVE. Under SAVE, 100% of unpaid interest was waived. Under IBR, interest often accumulates if the payment doesn’t cover it.
The PSLF “Buyback” Question
For public servants, the months spent in this interest-accruing forbearance are a major concern.
Current guidance suggests that months spent in the SAVE litigation forbearance generally do not count toward the 120 payments required for PSLF.
However, the Department of Education has maintained a “buyback” provision.
This mechanism may allow retroactive credit in limited cases, but does not guarantee relief. It requires borrowers to retroactively pay what they would have owed for those months, but only after they have accumulated 120 months of certified employment.
This offers a procedural pathway, but it requires borrowers to wait years to see if the buyback process works for their specific timeline.
What Should You Watch For?
If you are currently on the SAVE plan, check your servicer dashboard for two specific indicators:
- Interest Accrual: Look at the “Outstanding Interest” field. If it is increasing daily, your 0% shield is gone.
- Repayment Plan Status: Confirm if it still says “SAVE” or if it has reverted to a standard plan.
The “forced” exit isn’t a physical eviction. It’s an economic pressure cooker. The longer you stay in the broken plan, the higher the cost becomes.
Related : MOHELA servicing explanations are covered in this guide on why MOHELA accounts show forbearance.
This article provides general information about the status of the SAVE plan and federal student loan litigation as reported publicly. Individual account circumstances vary based on loan type and repayment history. School Aid Specialists notes that specific questions about plan eligibility and interest calculations should be directed to your federal loan servicer.
Sarah Johnson is an education policy researcher and student-aid specialist who writes clear, practical guides on financial assistance programs, grants, and career opportunities. She focuses on simplifying complex information for parents, students, and families.
