Update on Federal Student Loan Repayment Plans: What Borrowers Need to Know

The Trump administration’s Department of Education has halted enrollment in four popular federal student loan repayment plans that offer borrowers affordable payments and a pathway to eventual student loan forgiveness. These plans, known as Income-Driven Repayment (IDR) plans, tie monthly payments to a borrower’s income and family size, with any remaining balance forgiven after 20 or 25 years. The suspension of these plans has left millions of borrowers in limbo, unsure of how to proceed with their repayment strategies.

The Court Ruling and Its Impact on IDR Plans

The suspension of IDR enrollment follows a court ruling in February that extended an injunction blocking the SAVE plan, an income-driven repayment plan introduced by the Biden administration in 2023. In response to the ruling, the Department of Education removed online and paper applications for all IDR plans, including the Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), and SAVE plans. While the SAVE plan was the target of the legal challenge, the Department of Education chose to halt processing for all IDR plans, citing the need to update its combined application system to comply with the court’s decision.

The court ruling also raised concerns about the future of student loan forgiveness under the ICR and PAYE plans, which were established by Congress in 1993. The 8th Circuit Court of Appeals expressed doubts about whether forgiveness at the end of the repayment term is legally permissible, contradicting decades of assurances provided to borrowers. However, the IBR plan and the Public Service Loan Forgiveness (PSLF) program, which forgives loans for nonprofit and government workers after 10 years, remain unaffected by the ruling.

Processing for All IDR Plans Is Halted

The Department of Education has made little effort to communicate the extent of the changes to borrowers. IDR applications were quietly removed from the StudentAid.gov website, and the only notice provided was a brief banner explaining that the removal was due to the court ruling. Recent reporting by The Washington Post revealed that all IDR processing has been halted, including for the IBR plan, which is not subject to the court’s injunction. This means that even borrowers who submitted IDR applications before the court order are now in a state of uncertainty.

The halt on IDR processing is particularly concerning for borrowers who were relying on these plans to continue progressing toward student loan forgiveness. Many borrowers are already feeling the effects of the SAVE plan forbearance, which pauses payments and interest but also stops the clock on forgiveness. The suspension of IDR enrollment adds another layer of complexity to an already challenging situation.

Income Recertification and Its Challenges

Borrowers currently enrolled in an IDR plan, except for the SAVE plan, can continue making payments during the processing pause. However, all borrowers in IDR plans are required to recertify their income annually to maintain their payment status. Without the ability to recertify, borrowers could face higher payments or interest capitalization, which adds to the overall debt burden. The only way to recertify income is through the IDR application process, which is currently unavailable.

Loan servicers are expected to delay annual recertification deadlines during the processing pause. However, anecdotal reports suggest that some servicers are giving borrowers an ultimatum: switch to a Standard, Extended, or Graduated repayment plan, or enter into a hardship forbearance. Neither option is ideal for borrowers who rely on the affordable payments and forgiveness offered by IDR plans.

How Long Will the Pause Last?

The Department of Education has not provided a timeline for when IDR processing will resume. However, a memo sent to loan servicers indicates that the pause could last at least 90 days, and possibly longer. This extended delay will compound the challenges faced by borrowers, many of whom have already waited months for their IDR applications to be processed. The resulting backlog of applications will likely cause further delays in accessing affordable payments and forgiveness, even after the pause is lifted.

The Implications for Borrowers

The suspension of IDR enrollment is a devastating blow to millions of borrowers who rely on these plans to manage their student loan debt. Advocacy groups, such as the Student Debt Crisis Center, have criticized the move as a deliberate effort to harm borrowers. “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,” said Natalia Abrams, President of the Student Debt Crisis Center.

For borrowers, the uncertainty surrounding IDR enrollment and forgiveness creates significant financial stress. Many are now forced to explore alternative repayment options, such as Standard or Extended plans, which may not offer the same protections or affordability. The prolonged pause in IDR processing also raises questions about the long-term viability of these plans and the commitment of the Department of Education to uphold its promises to borrowers.

As the situation continues to unfold, borrowers are left with little choice but to wait for further guidance from the Department of Education. Advocates are urging policymakers to intervene and restore access to IDR plans, ensuring that borrowers can continue to rely on these critical pathways to affordable repayment and forgiveness. In the meantime, the financial futures of millions remain uncertain.