Federal student loans start accruing interest again the day after whichever pause you were in comes to an end. For the nationwide COVID-19 payment pause, that date was September 1, 2023, with the first payments due in October 2023. For borrowers sitting in the SAVE plan forbearance, interest restarted on August 1, 2025. For an individual borrower leaving a grace period, deferment, or forbearance, interest resumes the day after that specific period expires. And on Direct Unsubsidized Loans and Parent PLUS Loans, interest never actually stopped in the first place — it accrues from the day the school receives the funds and keeps going through every pause.
The COVID-19 Payment Pause Ended in Fall 2023
The payment pause that began in March 2020 ended after Congress passed the Fiscal Responsibility Act of 2023, which barred the Department of Education from extending it again.1House Financial Services Committee. Fiscal Responsibility Act Section-by-Section Summary Interest began accruing again on all affected federal loans in September 2023, and the first bills came due in October 2023.
The 0% rate was temporary. Every borrower’s rate reverted to the original fixed rate assigned when each loan was first disbursed. If you borrowed across multiple years, each loan carries its own rate, which you can look up by signing in at StudentAid.gov.
SAVE Plan Borrowers: Interest Restarted August 1, 2025
The SAVE (Saving on a Valuable Education) plan was designed to cover 100% of remaining interest on both subsidized and unsubsidized loans after each scheduled payment.2Edfinancial Services. Saving on a Valuable Education (SAVE) Plan Court injunctions blocked the plan before it was fully implemented, and enrolled borrowers were placed in a general forbearance while the litigation played out.
That forbearance is no longer interest-free. Loans in the SAVE forbearance began accruing interest again on August 1, 2025. In December 2025, the Department of Education proposed a settlement that would end the SAVE plan entirely, deny pending applications, and move current SAVE borrowers into other available repayment plans.3Federal Student Aid. Court Actions – Federal Student Aid If you are sitting in SAVE forbearance now, interest is growing without any payment credit toward forgiveness. Contact your servicer about switching to a different income-driven plan such as IBR or PAYE.
When Interest Starts After You Leave School
Most federal Direct Loans come with a six-month grace period that begins when you graduate, leave school, or drop below half-time enrollment.4Federal Student Aid. How Long Is My Grace Period Whether interest accrues during that grace period depends entirely on the loan type.
Direct Subsidized Loans
Interest on Direct Subsidized Loans does not accrue while you are enrolled at least half time or during the six-month grace period. The federal government covers it.5Federal Student Aid. Top 4 Questions: Direct Subsidized Loans vs. Direct Unsubsidized Loans Interest starts accruing for the first time the day after your grace period ends and the loan enters repayment.
Direct Unsubsidized Loans
Interest on unsubsidized loans starts accumulating the moment your school receives the funds and never stops.5Federal Student Aid. Top 4 Questions: Direct Subsidized Loans vs. Direct Unsubsidized Loans By the end of a four-year degree plus the grace period, several thousand dollars of interest may already be sitting on the loan. If you do not pay it off before repayment begins, it gets capitalized onto your principal.
Parent PLUS Loans
Parent PLUS Loans have no automatic grace period. Payment is due within 60 days of the final disbursement unless the parent borrower specifically requests a deferment while the student is enrolled and for six months afterward.6Federal Student Aid. Grace Periods, Deferment, and Forbearance in Detail PLUS Loans are unsubsidized, so interest accrues from disbursement and continues through any deferment, then capitalizes when the deferment ends.7Federal Student Aid. Parent PLUS Borrower Deferment Request
Interest During Deferment and Forbearance
If you enter a pause after repayment has already started, interest behavior depends on both the loan type and the kind of pause.
In a deferment, the government pays the interest on Direct Subsidized Loans. Your balance stays flat, and interest simply resumes on the same principal when the deferment ends.8Consumer Financial Protection Bureau. What Is Student Loan Forbearance Direct Unsubsidized Loans and PLUS Loans get no subsidy — interest accrues the entire time, and you owe it.6Federal Student Aid. Grace Periods, Deferment, and Forbearance in Detail
Forbearance offers no interest subsidy on any loan type. Interest accrues on subsidized and unsubsidized loans alike for the full forbearance period.8Consumer Financial Protection Bureau. What Is Student Loan Forbearance When the forbearance ends, your servicer typically capitalizes that accumulated interest onto your principal.
In both cases, interest becomes a borrower obligation on the first day after the relief period expires.
What Capitalization Means When Interest Restarts
Capitalization happens when unpaid accrued interest gets added to your principal balance. After it happens, your daily interest is calculated on the new, higher balance, so you are effectively paying interest on interest.9Consumer Financial Protection Bureau. How Does Interest Accrue While I Am in School
A quick example: on a $10,000 unsubsidized loan at 6.8%, a six-month deferment with no payments produces roughly $340 in accrued interest. That $340 capitalizes at the end of the deferment, bringing the balance to $10,340, and the daily interest charge rises from $1.86 to $1.93.10Nelnet. Interest Capitalization
Under current federal regulations, capitalization is required by statute in only two situations: when a borrower exits a deferment period, and when a borrower leaves the IBR plan.11U.S. Department of Education. Eliminate Interest Capitalization Capitalization also occurs when you take out a Direct Consolidation Loan, because the new loan’s principal equals the payoff of the old loans, which includes any unpaid interest.12eCFR. Part 685 – William D. Ford Federal Direct Loan Program
How to Blunt the Impact When Interest Resumes
The most effective move is to pay the interest as it accrues, even when principal payments are paused. Small monthly interest-only payments during a grace period, deferment, or forbearance prevent the balance from growing and prevent capitalization from raising your daily interest charge going forward.
If a full payment is unaffordable when your pause ends, an income-driven repayment plan can set your monthly bill as low as $0 based on income and family size. Under IBR, if you have subsidized loans and your calculated payment falls short of the monthly interest, the government covers the difference for the first three consecutive years.13Edfinancial Services. Income-Based Repayment (IBR) PAYE offers a similar subsidy for subsidized loans. Enrolling in an IDR plan is far better than letting the loan go delinquent once interest and payments restart.
One boundary to keep in mind: none of the federal pause rules above apply to private student loans. Private lenders do not offer subsidized interest, and grace period, deferment, and forbearance terms are set by your loan contract rather than federal regulation. Check your promissory note or contact your lender for those specifics.