Senators Chuck Schumer, Elizabeth Warren, and Bernie Sanders are calling on Education Secretary Linda McMahon to reverse the Department of Education’s decision to resume interest charges for nearly 8 million student loan borrowers currently trapped in forbearance under the SAVE (Saving on a Valuable Education) plan. The move could cost borrowers over $27 billion in the next year, with an average monthly increase of $300 per borrower.
💸 Why it matters to collections: Consumers impacted by the SAVE interest restart will have less money available for other financial obligations — including credit card, medical, auto, and personal loan debts. Collection professionals should be aware of the increased financial strain as they evaluate payment plans and engagement strategies.
🧾 By the numbers: According to a state-by-state analysis by the Student Borrower Protection Center:
- Borrowers in California will face $2.6B in annual interest charges — the highest total.
- Florida ($1.99B), Texas ($2.15B), and New York ($1.6B) are also heavily impacted.
- Monthly interest per borrower averages $321 in California and $308 in Florida.
- Nationally, borrowers will be hit with thousands of dollars in added debt: For example, the average borrower in Georgia will pay $324 per month, or nearly $3,900 annually.
🗣️ What the Senators say: The Senators argue that the Department’s claim — that restarting interest is required by court order — is false. They note:
“No court has ordered ED to resume interest charges,” and cite federal law that gives the Department broad authority to suspend interest independently of SAVE.
They also criticize the Department for failing to provide alternative IDR (Income-Driven Repayment) options amid a backlog of 1.5 million applications, noting that fewer than 3% of affected borrowers have exited the forbearance.
📣 What’s next: The Senators have demanded a response from Secretary McMahon by July 28, asking for detailed data on borrower impacts and whether the Department will clear the IDR backlog before resuming interest charges on August 1.
Read the letter. Read the analysis
