A student is focused on their studies at the Perry-Castaneda Library at the University of Texas in Austin, captured on February 22, 2024.
The current administration has recently removed the applications for sought-after student loan repayment plans from the U.S. Department of Education’s website, creating a temporary hurdle for millions of borrowers. This disruption particularly affects those looking to apply for income-driven repayment (IDR) plans or to consolidate their loans online.
These applications play a crucial role for borrowers aiming to manage lower monthly payments or trying to secure loan forgiveness via an IDR plan or the Public Service Loan Forgiveness program. The root of this disruption is linked to a decision made by the 8th Circuit Court of Appeals which halted the Biden administration’s newly proposed IDR plan, referred to as SAVE, along with the loan forgiveness elements within other IDR plans.
IDR plans have been around since the 1990s, designed to make monthly payments more manageable by capping them at a percentage of the borrower’s discretionary income. Any outstanding debt is often canceled after 20 to 25 years. As of September 2024, over 12 million people were enrolled in these plans, as noted by higher education expert Mark Kantrowitz.
Here’s what you need to know about this situation.
Applications Could Be Unavailable for a Few Months
Mark Kantrowitz anticipates that the unavailability of these applications shouldn’t last long. "I think it’ll be a temporary issue, perhaps just lasting a few months while adjustments are made," he explained.
The Education Department is likely in the process of revising these applications to ensure they align with the recent court ruling, which means eliminating the SAVE plan as well. According to a spokesperson from the Education Department, the agency is "reviewing the repayment applications to accommodate the 8th Circuit’s decision." As of now, the online applications for IDR and loan consolidation are unavailable, though submitting a paper loan consolidation application remains an option.
Betsy Mayotte, who heads The Institute of Student Loan Advisors, believes the applications won’t be offline for a long period. “It seems the Education Department is putting in a lot of effort to implement the necessary changes,” she stated.
Effects of the Plans on Hold
For federal student loan borrowers wanting to enroll in an IDR plan or switch between plans, there’s no immediate action they can take, as Mark Kantrowitz points out. Those due to recertify their current plans will also face a waiting game. Typically, borrowers in IDR plans need to provide income information every year.
While the legal debates surrounding SAVE continue, the Biden administration has placed plan participants in an interest-free forbearance. Experts anticipate this pause will end soon, by which time other IDR options should be up and running again.
New graduates usually have a six-month grace period before their first payment is required, allowing them time to wait for plan availability, expected to resume by November or December.
Alternatives if You Can’t Meet Your Student Loan Payment
This pause in IDR accessibility is particularly challenging for borrowers who are struggling to pay their existing student loan. According to Betsy Mayotte, these individuals should get in touch with their loan servicers to discuss their circumstances.
For those facing unemployment, an unemployment deferment request can be made through the loan servicer. Additionally, if borrowers encounter other financial difficulties, they may qualify for an economic hardship deferment.
Other lesser-known deferment options include those for graduate fellowship, military service, post-active duty, and cancer treatment situations. If deferment is not an option, borrowers can also consider requesting a forbearance.
Experts recommend exploring deferment first, as it may prevent interest from accruing on the loans, which is often not the case during forbearance. Through forbearance, loans can be paused for up to three years, but with accumulating interest, borrowers might confront a heftier bill once payments resume.
