Income-Driven Repayment Applications Halted, Leaving Student Loan Borrowers Uncertain

The U.S. Department of Education recently pulled both the online and paper versions of applications for all income-driven repayment (IDR) plans on February 21. This decision came in response to a legal ruling surrounding the new IDR plan known as Saving on a Valuable Education (SAVE).

An Education Department spokesperson shared that a federal Circuit Court of Appeals had issued an injunction stopping the department from implementing the SAVE Plan, along with parts of other IDR plans. As a result, applications for IDR and online loan consolidation are temporarily unavailable while the department reviews repayment applications in light of the 8th Circuit’s ruling.

This situation means borrowers cannot currently apply for the SAVE Plan or the other three IDR plans: Pay As You Earn (PAYE), Income-Contingent Repayment (ICR), and Income-Based Repayment (IBR).

Last year, the online IDR application was also down from July to September, but at that time, paper applications served as a backup, though with delays in processing.

Abby Shafroth, co-director of advocacy at the National Consumer Law Center, expressed concern over the heightened risk to borrowers this time around. She highlighted that the temporary student loan "on-ramp" that prevented borrowers who missed payments from facing delinquency or default expired on September 30. So, those unable to afford standard payments and blocked from IDR plan applications might be unjustly impacted now.

Here’s how the IDR application suspension impacts borrowers and the options available to them:

Borrowers Needing to Recertify Their Income for IDR Plans

Some borrowers on IDR plans may find themselves unfairly penalized. Missing the recertification deadline could lead to losing their IDR plan status and seeing their loan balance swell because of capitalized interest, explains Shafroth. However, borrowers with loans under the SAVE plan need not worry right now, as their recertification deadlines have been pushed to at least February 2026, based on updated guidance from the Education Department.

As Scott Buchanan, executive director of the Student Loan Servicing Alliance, mentions, loan servicers are awaiting further direction on recertification from the Education Department for the other IDR plans. He anticipates a delay in recertification deadlines for all who are enrolled in IDR plans.

In the meantime, servicers aim to support borrowers facing imminent certification deadlines to help them avoid penalties, according to Buchanan. He advises borrowers nearing their recertification dates to reach out to their servicers for available options, as this situation evolves daily.

What You Can Do

1. Verify Contact Information: Contact your servicer to ensure your information is up to date and inquire about recertification options if your deadline approaches.

2. Stay Informed: Await further guidance from the Education Department, which has, in the past, postponed recertification deadlines during uncertain times.

Recent Graduates Looking to Enroll in an IDR Plan

Those who recently graduated or left college last spring are now facing student loan repayment, typically with the option to choose among IDR plans to limit each month’s payments based on discretionary income.

Currently, new grads must choose between the standard 10-year repayment plan, the graduated plan, or the extended plan. However, these options can be significantly costlier, especially for those still job-hunting or earning entry-level salaries.

What You Can Do

1. Estimate Payments: Utilize the Education Department’s loan simulator to predict your payments under the standard, extended, and graduated plans.

2. Monitor IDR Updates: Apply for an IDR plan once they reopen.

3. Seek Guidance: Request advice from your servicer regarding the plan with the lowest payments.

4. Consider Deferment: If you don’t yet have employment, defer your payments due to unemployment, though note that interest may accumulate.

Borrowers Needing Lower Payments

Previously, borrowers with burdensome payments could switch to an IDR plan for relief, even converting to payments as low as $0 when income was minimal.

Without access to IDR options, Karen McCarthy from the National Association of Student Financial Aid Administrators warns that borrowers could face delinquency and default. Now, deferrals or forbearances are the only alternatives for temporary payment relief, often leading to accruing interest and a higher total repayment over time.

What You Can Do

1. Pause Payments: Although interest may accrue, using deferment or forbearance allows you to avoid default. Deferment is generally more favorable as interest is less likely to pile up, but it has specific qualifying conditions.

2. Avoid Delinquency: Simply not paying isn’t advisable; it risks credit damage and financial havoc. Always opt for a deferment or forbearance first.

Borrowers Wanting to Consolidate Student Loans

While paper consolidation applications remain an option, they aren’t being processed at the moment, says Buchanan.

Consolidation involves replacing multiple federal loans with a single one, unlike refinancing, which swaps loans with a private lender. To qualify for IDR plans or Public Service Loan Forgiveness (PSLF), older federal loans, such as FFELP loans, need consolidation.

Still, Shafroth advises waiting on consolidation applications to ensure the department will continue recognizing prior payments toward IDR forgiveness.

What You Can Do

1. Hold Off on Consolidation: Without current IDR enrollment options, wait for Education Department updates on payment counting for PSLF and IDR forgiveness.

2. Submit a Paper Application if Necessary: Fill out and mail the PDF version of the consolidation form to your servicer, knowing you’ll face processing delays.

SAVE Borrowers Seeking PSLF Credit

Since lawsuits instigated a pause last summer, SAVE plan borrowers haven’t had student loan payments collecting interest but aren’t advancing toward obtaining PSLF either. Previously, transferring to an alternate IDR plan provided a way to earn PSLF credit, but this option is now off the table.

What You Can Do

1. Switch to Standard Plan: Payments under a standard repayment plan qualify for PSLF, but they might be more expensive than SAVE plans. Using the loan simulator will aid in estimating. It’s wise not to stay in the standard plan for a full term if close to completing PSLF.

2. Consider PSLF Buyback: After reaching a PSLF milestone, the buyback program may help reclaim payments not made due to SAVE forbearance.

Other Resources and Assistance

This fluid situation can benefit from timely updates and custom guidance. Explore these resources for student loan assistance:

• Contact Your Servicer: They’re your primary contact for repayment questions, with details available on your studentaid.gov dashboard.

• Check In with Your College’s Financial Aid Office: Even long removed from campus life, their financial aid experts can spell out your options, though servicers handle applications for deferments or forbearances.

• Turn to Aid Organizations: Nonprofits like the National Consumer Law Center offer valuable resources for understanding repayment choices.