The U.S. Education Department directed its federal student loan servicers to restart interest accrual on Aug. 1 for participants in the Biden-era SAVE plan. (Catherine Lane/Getty Images)

WASHINGTON — Interest accrual on the debt of nearly 7.7 million student loan borrowers enrolled in the Saving on a Valuable Education plan will resume Aug. 1, the U.S. Education Department said Wednesday.

The Biden-era income-driven repayment plan better known as SAVE saw legal challenges from several GOP-led states beginning in 2024, creating uncertainty for borrowers who were placed in an interest-free forbearance amid that legal limbo.

The SAVE plan, created in 2023, aimed to provide lower monthly loan payments for borrowers and forgive remaining debt after a certain period of time.

In February, a federal appeals court upheld a lower court injunction that blocked the SAVE plan from going into effect. The department said Wednesday that it’s instructing its federal student loan servicers to start charging interest Aug. 1 to comply with court orders.

When the SAVE plan forbearance ends, “borrowers will be responsible for making monthly payments that include any accrued interest as well as their principal amounts,” the department said in a written announcement.

“For years, the Biden Administration used so-called ‘loan forgiveness’ promises to win votes, but federal courts repeatedly ruled that those actions were unlawful,” Education Secretary Linda McMahon said in a statement alongside the announcement.

“Congress designed these programs to ensure that borrowers repay their loans, yet the Biden Administration tried to illegally force taxpayers to foot the bill instead,” she added.

McMahon said her department is urging borrowers under the SAVE plan to “quickly transition to a legally compliant repayment plan.”

“Borrowers in SAVE cannot access important loan benefits and cannot make progress toward loan discharge programs authorized by Congress,” she said.

‘Unnecessary interest charges’

Mike Pierce, executive director of the Student Borrower Protection Center, blasted the department’s decision in a statement Wednesday.

“Instead of fixing the broken student loan system, Secretary McMahon is choosing to drown millions of people in unnecessary interest charges and blaming unrelated court cases for her own mismanagement,” he said.

“Every day, we hear from borrowers waiting on hold with their servicer for hours, begging the government to let them out of this forbearance, and help them get back on track — instead, McMahon is choosing to jack up the cost of their student debt without giving them a way out.”

The agency has taken heat for its sweeping actions in the months since President Donald Trump took office as he and his administration look to dismantle the department.

The department is also mired in a legal challenge over some of its most significant efforts so far, including laying off more than 1,300 employees earlier this year as part of a reduction in force effort, an executive order calling on McMahon to facilitate the closure of her own agency and Trump’s proposal to transfer some services to other federal agencies. These actions have been temporarily halted in court.

Meanwhile, President Donald Trump signed a massive tax and spending cut bill into law last week, part of which forces any borrower under the SAVE plan to opt in to a different repayment plan by July 1, 2028, or be automatically placed in a new, income-based repayment plan. 

A student draws with chalk on an outdoor court at a New York City public school in 2022. If states don’t receive billions in congressionally approved funding for K-12 education that the Trump administration is withholding, officials say programs for migrants, English-language learners and kids in need of after-school care will be at risk. (Photo by Michael Loccisano/Getty Images)

The U.S. Department of Education’s decision last week to hold back $6.8 billion in federal K-12 funds next year has triggered alarm among state education officials, school leaders and advocacy groups nationwide over how the lack of funds will affect their after-school, enrichment and language-learning services.

The Trump administration’s decision to freeze the funding has put states in “triage mode” as they scramble to decide what programs may be cut without that funding, said Mary Kusler, senior director for the Center for Advocacy at the National Education Association. The money was approved by Congress to support education for English language learners, migrants, low-income children and adults learning to read, among others.

As of July 1, school systems are unable to draw down funding, jeopardizing summer programs, hiring and early-year planning for the 2025–26 school year.

The funding freeze affects several core programs: Title II-A (educator training and recruitment), Title III-A (English learner support), Title IV-A (student enrichment and after-school), as well as migrant education and adult education and literacy grants. Trump has proposed eliminating all those programs in his proposed budget for next fiscal year, but that proposal hasn’t gone through Congress.

State superintendents sent out missives to school districts early this week and now are scrambling to make choices.

“This is not about political philosophy, this is about reliability and consistency,” Alabama state Superintendent Eric Mackey said to Politico. “None of us were worrying about this.”

The administration says it is reviewing the programs.

“The Department remains committed to ensuring taxpayer resources are spent in accordance with the President’s priorities and the Department’s statutory responsibilities,” the U.S. Department of Education wrote to states in its announcement June 30.

Historically, the department releases allocations by July 1 to ensure schools can budget and plan effectively for the coming school year. Withholding the money could result in canceled programs, hiring freezes and the loss of essential support for English learners, migrant children and other high-need populations, education and state officials told Stateline.

“America’s public school leaders run district budgets that are dependent on a complex partnership between federal, state, and local funding,” said David R. Schuler, executive director of the School Superintendents Association in a statement. “For decades, school districts have relied on timely confirmation of their federal allocations ahead of the July 1 start of the fiscal year — ensuring stability, allowing for responsible planning, and supporting uninterrupted educational services for students.”

The states facing the largest withheld amounts include California ($810.7 million), Texas ($660.9 million), and New York ($411.7 million), according to data from the NEA and the Learning Policy Institute, an education think tank.

For 17 states and territories, the freeze affects over 15% of their total federal K-12 allocations, according to the Learning Policy Institute. For smaller jurisdictions such as the District of Columbia and Vermont, the disruption hits even harder: More than 20% of their federal K-12 budgets remain inaccessible.

Colorado Education Commissioner Susan Córdova urged school districts to begin contingency planning in case funds are not released before the federal fiscal year ends on Sept. 30. California State Superintendent Tony Thurmond hinted at possible legal action, which has become a trend as states fight the second Trump administration’s funding revocations or delays.

“California will continue to pursue all available legal remedies to the Trump Administration’s unlawful withholding of federal funds appropriated by Congress,” Thurmond said in a statement.

The NEA and the NAACP have filed for a preliminary injunction, calling the administration’s delay an illegal “impoundment” — a violation of the federal Impoundment Control Act, which bars the executive branch from withholding appropriated funds without congressional approval.

Education advocates warn the recent decision by the Trump administration to withhold funding reflects a broader pattern of federal disengagement from public education.

Community nonprofits said the withholding could devastate their programming too. The Boys and Girls Clubs of America could have to close more than 900 centers — bringing the loss of 5,900 jobs and affecting more than 220,000 children, said President and CEO Jim Clark in a statement.

The 1974 Impoundment Control Act lets the president propose canceling funds approved by Congress. Lawmakers have 45 days to approve the request; if they don’t, it’s denied. Meanwhile, agencies can be directed not to spend the funds during that time.

A White House statement shared with States Newsroom this week said “initial findings have shown that many of these grant programs have been grossly misused to subsidize a radical leftwing agenda.”

“Kids, educators, and working families are the ones losing,” said Kusler, of the NEA. “We need governors and communities to step up — now.”

Stateline reporter Robbie Sequeira can be reached at rsequeira@stateline.org.

Stateline is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Stateline maintains editorial independence. Contact Editor Scott S. Greenberger for questions: info@stateline.org.

U.S. Education Secretary Linda McMahon testifies before the U.S. House Education and Workforce Committee on Wednesday, June 4, 2025. (Screenshot from committee livestream)

WASHINGTON — Education Secretary Linda McMahon took heat from Democrats on the U.S. House Committee on Education and Workforce on Wednesday over the Trump administration’s initiatives to dramatically overhaul the federal role in education and eliminate the Education Department.

Lawmakers took aim at President Donald Trump’s fiscal 2026 budget request — which includes $12 billion in spending cuts — as well as efforts to dismantle the agency and threats to yank funds for schools that use race-conscious practices across aspects of student life.

A department summary said the cut “reflects an agency that is responsibly winding down.”

Chair Tim Walberg, a Michigan Republican, praised McMahon’s efforts.

“We believe in reducing bureaucracy, trusting our educators, trusting our state and local leaders and trusting the innovators who are pushing against the barriers thrown up by the bureaucracy,” he said. “And above all, we trust our parents — this is our vision, and thankfully, we finally have an administration in place that shares this vision.”

But Rep. Bobby Scott, ranking member of the panel, blasted the department’s priorities, including the budget proposal, which he said “would make it more difficult for students to enroll in and afford a college education by proposing reductions in funding to need-based grants such as Pell and work study.”

“At the end of the day, it is the students of this nation who will suffer under this budget proposal,” the Virginia Democrat said. “Students from low-income families and students with disabilities, English learners, international students and students of color will face more hurdles accessing equal educational opportunity.”

The budget calls for eliminating key programs administered by the Education Department for disadvantaged and low-income students, including Federal TRIO Programs and the Gaining Early Awareness and Readiness for Undergraduate Programs, or GEAR UP.

The budget request also proposes a $60 million increase to expand the number of charter schools in the country and lowering nearly $1,700 from the maximum amount a student can receive annually through the Pell Grant — a government subsidy that helps low-income students pay for college.

A federal judge in Massachusetts in May dealt the administration a major setback to its education agenda, ordering the agency to reinstate the more than 1,300 employees gutted during a reduction in force effort, blocking the department from carrying out Trump’s order to close the department and barring the department from transferring the student loan portfolio and special education services to other federal agencies while the case challenging those policies is ongoing.

A federal appeals court on Wednesday upheld the trial judge’s order. 

DEI lesson plans

Democrats on Wednesday took aim at the administration’s efforts against diversity, equity and inclusion, or DEI, programs. The administration had sought to bar schools from using DEI practices across aspects of student life to continue to receive federal funding, an effort that multiple federal judges have blocked.

Rep. Summer Lee of Pennsylvania said the Trump administration “has undoubtedly revived the culture of racism we haven’t seen since the Jim Crow era,” adding that “they’ve made it clear that open attacks on Black and brown and other marginalized communities is not just tolerated, but it’s encouraged.”

Asked by Lee whether a lesson plan on the Tulsa race massacre would be considered “illegal DEI,” McMahon replied: “I’d have to get back to you on that.”

Lee then asked McMahon whether she knew what the Tulsa race massacre was, to which the secretary said: “I’d like to look into it more and get back to you on it.”

McMahon was similarly noncommittal on a question about assigning school desegregation icon Ruby Bridges’ autobiography.

State flexibility

The budget proposal also calls for consolidating 18 grant programs for K-12 education and replacing them with a single formula grant program, which the administration says will give states spending flexibility.

Democrats at Wednesday’s hearing blasted the administration’s push to return education “back to the states,” noting that some states have poor records on education.

Rep. Yassamin Ansari said the education system is “absolutely failing” many students in the United States. The main cause of that, the Arizona Democrat said, was that many states have “woefully underfunded” their public education systems and not, as the administration has claimed, due to “too much” federal oversight or DEI policies.

When asked by Ansari what risk McMahon weighed for public schools and universities if federal education funding is gutted or devolved to the states, the secretary said “federal education wouldn’t necessarily be gutted” and that “there would be more money to go to the states without the bureaucracy of the Department of Education.”

Ansari rejected that claim, noting that some states, including hers, have an “abysmal track record of managing education.” She pointed to Arizona’s low rankings on public education, teacher salaries, test scores and the highest student-to-teacher ratio in the country.

The Lyndon Baines Johnson Department of Education Building pictured on Nov. 25, 2024. (Photo by Shauneen Miranda/States Newsroom)

WASHINGTON — The U.S. Department of Education must temporarily reinstate the hundreds of employees laid off earlier this year and cannot follow through on an executive order from President Donald Trump seeking to dismantle the agency, a federal judge in Massachusetts ruled Thursday. 

The ruling stems from a pair of March lawsuits — one from a slew of Democratic attorneys general, another from a coalition of advocacy and labor groups — and blocks three Trump initiatives, marking a major blow to the president’s education agenda as his administration seeks to dramatically reshape the federal role in education.

The lawsuits challenge some of the administration’s most consequential education initiatives so far: a reduction in force effort at the agency that gutted more than 1,300 employees, Trump’s executive order calling on Education Secretary Linda McMahon to facilitate the closure of her own department and Trump’s proposal to rehouse the student loan portfolio in the Small Business Administration and special education services in the Department of Health and Human Services.

“A department without enough employees to perform statutorily mandated functions is not a department at all,” U.S. District Judge Myong J. Joun wrote in his 88-page memorandum and order granting a preliminary injunction.

“This court cannot be asked to cover its eyes while the Department’s employees are continuously fired and units are transferred out until the Department becomes a shell of itself,” wrote Joun, whom former President Joe Biden appointed.

Joun’s preliminary injunction took effect immediately and will remain until the merits of the consolidated case are decided.

A department spokesperson said the administration would immediately appeal the ruling. The agency has since filed an appeal.

Win for Democratic states

One of the cases comes from a coalition of Democratic attorneys general in Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New York, New Jersey, Oregon, Rhode Island, Vermont, Washington state and Wisconsin.

The other lawsuit was brought by the American Federation of Teachers, its Massachusetts chapter, AFSCME Council 93, the American Association of University Professors, the Service Employees International Union and two school districts in Massachusetts.

The department’s reduction in force plan prompted concerns from education advocates and leaders over how the agency would be able to carry out its core responsibilities after roughly halving its workforce, including major cuts to key units including the Office of Federal Student Aid, Office for Civil Rights and the Institute of Education Sciences.

Randi Weingarten, president of the American Federation of Teachers, one of the largest teachers unions in the country, celebrated the ruling in a Thursday statement.

“Today, the court rightly rejected one of the administration’s very first illegal, and consequential, acts: abolishing the federal role in education,” Weingarten said.

“This decision is a first step to reverse this war on knowledge and the undermining of broad-based opportunity. For America to build a brighter future, we must all take more responsibility, not less, for the success of our children.”

Joun’s order also bars the agency from carrying out the president’s directive to transfer the student loan portfolio and special education services out of the agency.

Trump announced the proposal, which had no accompanying executive order, at the opening of an Oval Office appearance with Defense Secretary Pete Hegseth. The department had told States Newsroom earlier this week that it had nothing new to share at this time regarding the proposed transfer. 

Judge ‘dramatically overstepped’

Madi Biedermann, a spokesperson for the department, said the agency “will immediately challenge this on an emergency basis.”

“Once again, a far-left Judge has dramatically overstepped his authority, based on a complaint from biased plaintiffs, and issued an injunction against the obviously lawful efforts to make the Department of Education more efficient and functional for the American people,” she said in a statement shared with States Newsroom.

“President Trump and the Senate-confirmed Secretary of Education clearly have the authority to make decisions about agency reorganization efforts, not an unelected Judge with a political axe to grind. This ruling is not in the best interest of American students or families.”

Thursday’s ruling came just a day after McMahon took a grilling from U.S. House Democrats over the drastic cuts and proposed changes at her department during a hearing in a panel of the U.S. House Committee on Appropriations.

McMahon appeared before the lawmakers to outline Trump’s fiscal year 2026 budget request, which calls for $12 billion in spending cuts at the department.