SAVE student loan interest error raises planning concerns

When Ellie Bruecker opened her student loan notice in early June, she didn’t expect to see her balance up by $3,000. According to Mohela, her federal loan servicer, interest had been accruing throughout the past year—even though Bruecker was enrolled in the Department of Education’s SAVE forbearance plan, which explicitly promised zero interest during the pause.

She’s not alone. Thousands of borrowers have taken to social media to ask why their balances are quietly growing. Federal officials say interest isn’t being charged. But loan records, like Bruecker’s, say otherwise.

This isn’t just a paperwork error. It’s a breakdown in financial governance—and a reminder that even “safe” planning assumptions can unravel when public systems lose capacity or accountability. For borrowers trying to make informed, long-term decisions, the real risk isn’t just a few thousand dollars in extra interest. It’s the erosion of trust in the debt terms they were told to rely on.

The SAVE (Saving on a Valuable Education) plan, introduced under the Biden administration, was meant to overhaul how federal student loans work for lower- and middle-income borrowers. It promised more generous income-driven repayment terms, interest subsidies, and time-based forgiveness.

When legal challenges put parts of SAVE on hold in mid-2024, the Department of Education issued an administrative forbearance: affected borrowers would not need to make payments, and no interest would accrue. That message—delivered through official channels and loan servicer notices—led millions to pause payments without fear of penalty. Many used the breathing room to redirect cash to credit card debt, build emergency funds, or stabilize cash flow.

But in June 2025, Mohela’s letters began telling a different story. They stated that interest was, in fact, accruing—and invited borrowers to pay it voluntarily. This isn’t a misunderstanding. It’s a direct contradiction of what borrowers were told—and structured their lives around.

Let’s be clear: a $3,000 increase on a five-figure loan isn’t catastrophic. But it breaks something more fragile: borrower belief that the terms of engagement are clear and trustworthy. When interest accrues silently during what was promised to be an interest-free pause, borrowers face three major risks:

1. Planning Mismatch
   Time-based forgiveness (such as 20- or 25-year forgiveness programs) relies on precise month-by-month tracking. A balance that grows unexpectedly can delay or reduce forgiveness benefits.
2. Liquidity Misallocation
   If borrowers had known interest would continue, many would have resumed partial payments—even token ones—to prevent debt growth. Instead, they may have shifted funds elsewhere, compounding the eventual repayment burden.
3. Psychological Disillusionment
   Student debt is already an emotionally loaded burden. When the rules change midstream—without notice—borrowers may disengage entirely, losing motivation to pay, plan, or trust future programs.

In short, the cost isn’t just financial. It’s behavioral and systemic.

Financial planning is usually thought of in terms of time, interest rates, and income. But one variable often goes unspoken: the credibility of the system administering the loan.

When that credibility weakens—due to political turnover, agency dysfunction, or inconsistent messaging—borrowers lose more than just faith. They lose clarity. And clarity is what allows people to make long-term tradeoffs: to refinance, to invest, to budget with confidence.

In this case, the Education Department has not acknowledged the discrepancy. Mohela hasn’t explained why the notices were sent. Call center support is stretched thin. And because the Department has laid off roughly half its staff in recent months, including many borrower support personnel, the likelihood of swift resolution is low. This isn’t just about a glitch. It’s about administrative fragility—and what that does to borrower psychology.

If you’re a borrower affected by this SAVE interest confusion, here’s what you can do:

• Check Your Loan Balance: Don’t rely on emails or generic notices. Log into both your servicer’s site and StudentAid.gov to confirm whether your balance has risen since July 2024.
• Keep Documentation: Download statements, take screenshots, and log any calls or emails you send to Mohela. You may need this if there’s a formal dispute process later.
• Avoid Premature Payments: If your balance has increased, you might feel pressure to start paying now. Instead, consider parking funds in a high-yield savings account as a safeguard until clarity returns.
• Monitor Legal Action: With advocacy groups raising the alarm and the Department facing lawsuits over SAVE implementation, legal clarity may take months—but it’s worth tracking.

These actions may help mitigate exposure. But they don’t solve the bigger problem: you can’t plan well if you’re not sure the system will behave as promised.

For financial advisors and fiduciaries, this moment is a case study in what happens when policy breakdowns affect borrower behavior. We often build plans assuming that government-issued products—like federal student loans—carry lower behavioral risk than private alternatives. But when systems become politicized or hollowed out, those assumptions falter.

A few questions worth asking now:

• Should long-term repayment timelines assume temporary pauses may be mishandled?
• Can income-driven plans still be recommended without warning of administrative volatility?
• What contingency funds should be layered into student debt strategies to handle policy reversals?

Even if this SAVE glitch is corrected, the memory of it may shape borrower behavior for years. Some may switch to more aggressive payment strategies to avoid reliance on uncertain benefits. Others may disengage entirely, seeing repayment plans as unreliable.

Borrowers deserve clarity. Not just in terms of how interest is calculated—but in how systems behave under stress. The SAVE forbearance error may be resolved quietly, or it may escalate into legal and political battles. But either way, the message for personal finance planners is clear: the credibility of institutions isn’t abstract. It’s a real part of risk management.

If you're carrying debt in a shifting policy landscape, remember: the smartest strategy isn’t just efficient. It's resilient. And resilience means planning for friction—even from the systems meant to help you.