AOC says student-loan borrowers 'should not be incurring interest' for at least a year after payments resume as she calls on Biden to 'consider' altering his plan

• Interest will start accruing on student loans in September ahead of payments restarting in October.
• Borrowers will have a 12-month "on-ramp" period for missed payments, but interest will still grow.

Interest will soon start accruing on student-loan borrowers' balances after President Joe Biden's broad debt cancellation was struck down. Rep. Alexandria Ocasio-Cortez wants the administration to reconsider that plan.

At the end of June, the high court ruled Biden's plan to cancel up to $20,000 in student debt for federal borrowers was an overreach of authority and cannot be implemented, blocking relief for millions of borrowers. Just hours after the Supreme Court handed down that decision, Biden announced additional measures to get relief to borrowers — including a new plan to use the Higher Education Act of 1965 for debt relief, along with a 12-month "on-ramp" period once payments resume to ensure that borrowers who miss payments will not be reported to credit agencies.

However, interest will still accrue during that period, and Ocasio-Cortez told CNN on Sunday borrowers should not have to deal with surging interest without debt relief.

"I would like to see interest payments suspended during this time, especially during that 12-month ramp-up period," Ocasio-Cortez said. "There are millions of people in this country that have student-loan debt amounts under ten or $20,000, as outlined in the plan. People should not be incurring interest during this 12-month on-ramp period, so I highly urge the administration to consider suspending those interest payments."

"Of course, we still believe in pursuing student-loan cancellation and acting faster than that 12-month period wherever possible," she added.

Ocasio-Cortez isn't alone in calling for interest to remain paused. California Rep. Ro Khanna told ABC News on Sunday, "I do hope that the White House will make sure that the interest doesn't accrue starting in September. I know the president has said he isn't going to refer students to the credit agency. I also believe under the Higher Education Act he can stop the interest accrual."

Biden has not yet commented on those requests, but the Education Department recommends borrowers make payments because interest is set to accrue a month before payments begin again in October. "When designing a new debt relief program, the Department of Education will consider ways to ensure that borrowers making payments do not reduce their eligibility for debt relief," the department wrote on Federal Student Aid's website.

As Insider previously reported, along with implementing a plan to ease repayment for borrowers, the department has also started the process of using the Higher Education Act for broad student-loan forgiveness. This process will take time because the Act needs to go through the negotiated rulemaking process, in which the department must hold hearings and solicit public comment before implementation.

Due to the nature of negotiated rulemaking, it's not clear which borrowers will qualify for Biden's new debt relief plan, and those who previously qualified for his first plan are not yet guaranteed relief this time around.

"The Department will design the parameters of the program with public participation over the coming months," the department's FAQ stated. "However, the Secretary has directed his staff to explore policy options for debt relief that will help as many people as possible."