Borrowers Report Interest Accrual Despite Federal Promise of Interest-Free Forbearance

Errors in student loan servicing raise concerns as balances grow under SAVE plan protections. Despite federal assurances of interest-free relief, some borrowers enrolled in the Saving on a Valuable Education (SAVE) plan are reporting unexpected increases in their student loan balances.

One borrower, Ellie Bruecker, discovered that her debt had grown by approximately $3,000, despite being under the Department of Education’s announced forbearance terms that guarantee zero interest accrual.

Concerned student | Source: Pexels

Bruecker, who serves as director of research at The Institute for College Access & Success, received a notice from her servicer, Mohela, on June 1, stating: “Although no payments are due at this time, interest continues to accrue on your loan(s) during the forbearance period.” This directly contradicts the Department’s guidance, which stated that interest would not accumulate for borrowers in the SAVE forbearance.

Millions of borrowers were moved into this interest-free forbearance beginning in the summer of 2024, following legal complications surrounding the Biden-era SAVE repayment program. Now, some of these borrowers are turning to social media to raise alarms over interest charges they were told wouldn’t happen.

The Education Department did not directly address the specific discrepancies but reiterated that “borrowers enrolled in the SAVE Plan remain in a forbearance that is not accruing interest.” Mohela, while not issuing a formal correction, posted a statement on its website indicating that recent interest notices were not bills and no action was required.

Concerned student | Source: Pexels

Higher education expert Mark Kantrowitz believes the notifications were likely sent in error, advising borrowers to “check their loan history” and contact Mohela if their balances have grown since July 2024.

“I have a real distrust this is going to get resolved for people,” said Bruecker, citing recent staffing cuts at the Education Department and difficulty reaching support representatives.