The Trump administration’s Department of Education has effectively halted enrollment in four popular federal student loan repayment plans that offer borrowers affordable payments and a pathway to eventual student loan forgiveness. And as the scope of the department’s actions becomes clearer, borrowers are already starting to be impacted.
In response to a court ruling in February that extended an ongoing injunction blocking the department from moving forward with the SAVE plan, an income-driven repayment plan launched by the Biden administration in 2023, the department took down online and paper applications for all IDR plans. IDR programs – which include Income-Based Repayment, Income-Contingent Repayment, and Pay As You Earn, as well as the SAVE plan – all tie a borrower’s monthly student loan payment to their income and family size, with any remaining balance forgiven at the end of the repayment term, which is typically 20 or 25 years. A group of Republican-led states filed a lawsuit last year to stop the SAVE plan, arguing that it was illegal.
The Department of Education did not make any public announcement (other than a brief notice on the department’s IDR website) about the removal of the IDR applications, and did not explain what the move might mean for student loan borrowers. But after days of confusion, the breadth of the impacts for student loan forgiveness and affordable repayment is finally coming into focus. Here’s what borrowers should know.
Suspension Of Key Student Loan Repayment Plans Follows Another Court Ruling
The suspension of access to IDR plans for student loan borrowers follows a ruling by the 8th Circuit Court of Appeals last month. In its decision, the court extended and broadened a preliminary injunction blocking the SAVE plan, keeping more than eight million borrowers stuck in a forbearance that pauses interest and payments. But the forbearance also stops the clock on student loan forgiveness for IDR plans as well as Public Service Loan Forgiveness, a related program that allows for student loan forgiveness in as little as 10 years for nonprofit and government workers.
The court also expressed doubts about student loan forgiveness at the end of the 20 or 25 year term under the ICR and PAYE plans, which were established under the same statute passed by Congress in 1993. The court’s legal conclusion upends three decades of assurances provided to borrowers through regulations, student loan agreements, and public guidance that borrowers would be entitled to loan forgiveness at the end of the term. The 8th Circuit left in place the IBR plan, which was created by Congress separately and is not being challenged, as well as PSLF.
Processing For All IDR Plans Is Suspended, Jeopardizing Access To Lower Payments And Student Loan Forgiveness
The Department of Education seemingly made minimal effort to communicate with the public about the state of IDR plans, leading to confusion as IDR applications were quietly removed from the department’s StudentAid.gov website last week. Aside from a simple banner notice on the site indicating that the removal of the applications was due to the 8th Circuit’s ruling, the department provided no public announcement. Late last week, the department updated a website dedicated to the SAVE plan legal challenges, but only to confirm that the IDR applications were removed.
According to recent reporting by The Washington Post last week, however, it’s not just that the IDR applications have been taken down. In fact, all IDR processing has been completely halted across the board. This is true for all IDR plans, including the Income-Based Repayment (or IBR) plan, which is not covered by the 8th Circuit’s injunction or subject to any legal challenge. The order to halt processing covers all IDR applications, including those that were submitted prior to the new court order. The reason, according to the Post, is that the department uses a combined IDR application for all plans (including IBR), which must now be updated to comply with the court’s order.
This could have significant impacts for borrowers. Many borrowers are trying to enroll in the IBR plan, the only option not directly impacted by the court order, to continue progressing toward student loan forgiveness on IDR repayment terms or PSLF, given the ongoing SAVE plan forbearance and the new limitations placed on the ICR and PAYE plans.
“This was a purposeful decision by the Trump Administration to harm borrowers and in no way needed to be done,” said Natalia Abrams, President & Founder of the Student Debt Crisis Center, in a statement last week. “Shutting down access to income-driven repayment plans was not the decision of the 8th Circuit—it was a malicious move by the Administration that will create serious hardship for millions of working families.”
Income Recertification For Student Loan Borrowers Is Also Impacted
Borrowers already enrolled in an IDR plan other than the SAVE plan should be able to continue making their payments during the processing pause. However, all borrowers in IDR must periodically recertify their income to have their monthly payment recalculated. Failure to do so can result in serious consequences including higher payments and, in some cases, interest capitalization. The only way borrowers can recertify their income is by completing the IDR application.
Loan servicers should be delaying annual IDR recertification deadlines to account to the current IDR processing pause, according to a statement made to The New York Times by a student loan servicing industry group representative. But as a practical matter, that may not be happening. Anecdotal reports indicate that at least some loan servicers are giving student loan borrowers with an imminent IDR recertification deadline an impossible choice: either switch to a Standard, Extended, or Graduated repayment plan (which may be prohibitively expensive and also won’t count toward student loan forgiveness), or go into a hardship forbearance, which borrowers only have access to for finite periods and could result in substantial interest consequences.
IDR Processing Pause Could Last Months, Further Delaying Access To Reduced Payments And Student Loan Forgiveness
The Department of Education has provided no guidance to borrowers on how long the IDR processing pause is expected to last. But according to The Washington Post, a memo the department sent to loan servicers indicates the process pause could last 90 days – the equivalent of three months – or even longer.
Many borrowers who submitted IDR applications have already been waiting months for their requests to be processed. A multi-month processing suspension, followed by what will almost certainly be an even more significant backlog of applications, could have profound implications for borrowers, further delaying access to affordable payments and student loan forgiveness that should otherwise be accessible under federal law.
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