(WXYZ) — Interest on federal student loans is beginning to accrue again this month, creating additional financial strain for millions of borrowers still navigating repayment challenges.
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Over 7 million borrowers had their student loan interest paused in 2024 due to the Saving on a Valuable Education (SAVE) Plan. While monthly payments remain paused until December of this year, interest will begin collecting again starting this month.
"The added stress of loan repayment will definitely have a huge impact on students, on families just being able to exist," Kevin Towns, Director of Financial Aid at the University of Michigan-Dearborn, said.
The SAVE Plan was designed to make monthly student loan payments more affordable based on income and family size, but the return of interest complicates the path to loan forgiveness.
One borrower, who requested anonymity due to concerns about employment repercussions, expressed frustration with the timing of interest resumption amid rising living costs.
"It's just this is just, it's not equity. It is not equality. It is, I know I keep saying predatory, but it just," they said. "I got that it's a loan. But why is the government making money off of it?"
Towns warns that adding interest to already substantial student loan balances could push financially vulnerable borrowers into deeper trouble.
"The immediate thing I think about is the fact that if students aren't able to pay on their student loans, how they could experience garnish, wage garnishments, they could see impacts to their credit, which then will impact their ability to purchase homes, purchase vehicles, it could impact small things like car insurance," Towns said.
Despite these challenges, Towns recommends several strategies for borrowers facing the return of interest.
"First thing, contact your servicer, understand what your current loan debt is, what your options are, what are the current, because there's been changes to repayment plans," Towns said.
He also encourages borrowers to utilize resources available through their universities.
"There's a lot of colleges that are also invested in making sure that students have the resources they need in order to make informed decisions about loan repayment," Towns said.
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