{"id":1016,"date":"2025-03-04T12:01:19","date_gmt":"2025-03-04T12:01:19","guid":{"rendered":"https:\/\/finzexpert.com\/blog\/student-loan-borrowers-blocked-from-affordable-repayment-plans\/"},"modified":"2025-03-04T12:01:19","modified_gmt":"2025-03-04T12:01:19","slug":"student-loan-borrowers-blocked-from-affordable-repayment-plans","status":"publish","type":"post","link":"https:\/\/finzexpert.com\/blog\/student-loan-borrowers-blocked-from-affordable-repayment-plans\/","title":{"rendered":"Student Loan Borrowers Blocked from Affordable Repayment Plans"},"content":{"rendered":"\n<div data-testid=\"companionColumn-0\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">Federal student loan borrowers are temporarily unable to apply to income-driven repayment plans, a decades-old safety net that ties their monthly loan payment size to household income levels, as the U.S. Education Department reviews a recent federal court ruling.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">The department closed applications to the repayment plans last week after the U.S. Court of Appeals for the Eighth Circuit upheld and expanded a temporary suspension of the Saving on a Valuable Education plan, known as SAVE.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">That income-driven program, a centerpiece of the Biden administration\u2019s policy agenda with eight million enrolled borrowers, generated lower payments than previous plans. Given its high cost, SAVE became the target of two separate legal challenges last spring by two groups of Republican-led states, which argued that the Biden administration had overstepped its authority.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">The SAVE plan has been in legal limbo ever since, and participants\u2019 payments have been on hold since last summer. But last week, applications to the three other income-driven plans were also taken down \u2014 older programs that hadn\u2019t been subject to any litigation. That effectively shut the door to more affordable plans for borrowers in financial distress, and eliminated a crucial component needed to participate in the Public Service Loan Forgiveness program \u2014 at least temporarily.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-1\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">\u201cThe department is reviewing repayment applications to conform with the Eighth Circuit\u2019s ruling,\u201d a spokesman for the Education Department said Thursday, adding that it updated information for borrowers on StudentAid.gov, including on a page about <a class=\"css-yywogo\" href=\"https:\/\/studentaid.gov\/announcements-events\/save-court-actions\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">court actions related to SAVE<\/a>.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Here\u2019s what we know now. The situation is fluid, so we\u2019ll update as circumstances change.<\/p>\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-55cf1a48\">What just happened?<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">The U.S. Court of Appeals for the Eighth Circuit upheld a temporary ban on a portion of the SAVE plan issued by the U.S. District Court for the Eastern District of Missouri. The appeals court sent the case back to the District Court with instructions to expand the preliminary injunction to the entire SAVE rule (though other legal rulings had already temporarily suspended the program).<\/p>\n<p class=\"css-at9mc1 evys1bk0\">But the appellate court didn\u2019t stop there: The judges also said the secretary of the Department of Education lacked the explicit authority to grant loan forgiveness in any Income-Contingent Repayment plans, even though it has been done for more than three decades. (Borrowers make monthly payments equal to a percentage of their discretionary income, which <a class=\"css-yywogo\" href=\"https:\/\/studentaid.gov\/manage-loans\/repayment\/plans\/income-driven\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">varies across income-driven plans<\/a>. But after a set number of years, usually 20 to 25, any remaining balance is canceled.)<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cThis is a radical departure from how this statute has been interpreted and administered for nearly 30 years,\u201d said <a class=\"css-yywogo\" href=\"https:\/\/ticas.org\/staff\/michele-zampini\/\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">Michele Zampini<\/a>, senior director of college affordability at the Institute for College Access and Success, a research and advocacy group.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">The Education Department posted a <a class=\"css-yywogo\" href=\"https:\/\/studentaid.gov\/idr\/\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">banner on its website<\/a> that said the injunction prevented it from administering SAVE and parts of other income-driven plans \u2014 and, as a result, applications for those plans and online loan consolidations were unavailable.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-2\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">It is important to remember that the decision is not final and that litigation is continuing, said Abby Shafroth, director of the National Consumer Law Center\u2019s Student Loan Borrower Assistance Project. \u201cBut the decision is very worrying for borrowers who depend on the SAVE plan to manage their payments and work toward being debt free,\u201d she said.<\/p>\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-4aac3e6c\">What\u2019s likely to happen next?<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">Scott Buchanan, the executive director of the <a class=\"css-yywogo\" href=\"https:\/\/slsa.net\/\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">Student Loan Servicing Alliance<\/a>, an industry group, said he would expect that applications for at least one of the income-driven plans, known as Income-Based Repayment, would become available again \u201cas soon as practical.\u201d<\/p>\n<p class=\"css-at9mc1 evys1bk0\">The reasons are complicated: That\u2019s because the Income-Based Repayment plan was created as part of a July 2009 law, which explicitly permits loan cancellation at the end of the repayment term, whereas SAVE was a regulation established by the department using authority established under a 1993 law. The states that initially brought the lawsuit argued that loan cancellation wasn\u2019t explicitly permitted under the 1993 law, and the appellate court sided with that interpretation.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">But the department has relied on that authority to create three other income-driven programs, all before SAVE, each of which incrementally improved on the plans before it. They were <a class=\"css-yywogo\" href=\"https:\/\/studentaid.gov\/help-center\/answers\/article\/icr-plan\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">Income-Contingent Repayment<\/a>, introduced in 1994; <a class=\"css-yywogo\" href=\"https:\/\/studentaid.gov\/help-center\/answers\/article\/paye-plan?mod=article_inline&amp;mod=article_inline\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">Pay as You Earn<\/a> (PAYE), introduced in 2012; and Revised Pay as You Earn (REPAYE), which became available in 2015 and was replaced by SAVE.<\/p>\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-700e036c\">Are income-driven loan applications being processed now?<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">No, all applications have been temporarily halted, according to Mr. Buchanan, of the alliance. He said that the servicers had received instructions to stop processing the income-driven and loan consolidation applications for three months, but that he expected they would receive additional guidance in the coming weeks.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-3\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">Monthly payments are still being collected on the other existing income-driven plans (Income-Based Repayment, Pay as You Earn and Income-Contingent Repayment) while SAVE borrowers remain in an interest-free forbearance while the litigation continues.<\/p>\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-430956ae\">Is the Public Service Loan Forgiveness program still available?<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">Yes, the <a class=\"css-yywogo\" href=\"https:\/\/studentaid.gov\/manage-loans\/forgiveness-cancellation\/public-service\/questions\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">Public Service Loan Forgiveness<\/a> program is still open to government and nonprofit employees such as public schoolteachers, librarians and public defenders. After 120 qualifying payments are made, any remaining balance is wiped out.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">But there is currently one major obstruction: Most borrowers need to <a class=\"css-yywogo\" href=\"https:\/\/studentaid.gov\/manage-loans\/forgiveness-cancellation\/public-service#qualifying-repayment-plans\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">be enrolled in an income-driven repayment plan<\/a> to be eligible for loan cancellation, and it\u2019s not possible to apply to any of those plans right now.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">If you\u2019re already in a qualifying repayment plan, however, and you become newly eligible for the public service program (because of a new job, for example), you can still enroll. But if you\u2019re in the SAVE plan, where payments have been halted because of the ongoing litigation, your qualifying payments have also been put on hold \u2014 and you can\u2019t make any progress toward forgiveness.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">The public service program, which President George W. Bush signed into law in 2007, is not at risk right now, and student loan experts say there isn\u2019t a broad appetite to dismantle the popular program, which would require Congress to pass a bill.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-4\">\n<div class=\"css-53u6y8\">\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-6e89393f\">What if I\u2019m close to making all of my payments in the public service program, but I am stuck in the SAVE plan?<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">More than two million people are enrolled in the public service program, and hundreds of thousands of them are approaching the finish line: 21,700 borrowers have made enough payments to qualify for cancellation, while 330,100 had made 97 to 119 qualifying payments as of Dec. 31, <a class=\"css-yywogo\" href=\"https:\/\/studentaid.gov\/data-center\/student\/loan-forgiveness\/pslf-data\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">according to data<\/a> from the Education Department\u2019s Federal Student Aid office.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Borrowers who are enrolled in the SAVE plan and have nearly enough qualifying payments currently have few good options.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cBorrowers stuck in SAVE can either wait for the I.D.R. applications to open back up and switch to another I.D.R. plan,\u201d said Betsy Mayotte, president of the <a class=\"css-yywogo\" href=\"https:\/\/freestudentloanadvice.org\/\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">Institute of Student Loan Advisors<\/a>, a group that provides free guidance to borrowers. \u201cOr ride out the SAVE forbearance and plan on using what\u2019s called \u2018buy back\u2019 to get credit for those months once they have certified 120 months of eligible employment.\u201d<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Using <a class=\"css-yywogo\" href=\"https:\/\/studentaid.gov\/manage-loans\/forgiveness-cancellation\/public-service\/public-service-loan-forgiveness-buyback\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">the so-called buy back<\/a> option, borrowers would need to make payments for the months their payments were paused in forbearance. Given the history of the complex program and the fact that many borrowers had found themselves in nightmarish situations and unable to receive forgiveness, be sure to document and keep copies or snapshots of everything \u2014 your work history with your eligible employer, all qualifying payments, recertification applications, all of it.<\/p>\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-53938149\">What are my options if I can\u2019t afford payments (because I lost my job or some other reason)?<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">There are other options besides income-driven repayment plans that can generally be requested through your loan servicer or the company that manages your payments. Borrowers can temporarily <a class=\"css-yywogo\" href=\"https:\/\/studentaid.gov\/help-center\/answers\/article\/what-is-loan-forbearance-deferment\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">pause payments<\/a> through <a class=\"css-yywogo\" href=\"https:\/\/studentaid.gov\/manage-loans\/lower-payments\/get-temporary-relief\/deferment\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">deferments<\/a> or <a class=\"css-yywogo\" href=\"https:\/\/studentaid.gov\/help-center\/answers\/article\/am-i-eligible-for-forbearance\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">forbearance<\/a>, but those programs have different eligibility requirements and consequences, largely because of the way interest is treated.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-5\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">\u201cBorrowers can receive deferments for things such as economic hardship or being unemployed,\u201d said Ms. Mayotte of the Institute of Student Loan Advisors. \u201cForbearances are generally applied in cases of less specific financial hardship.\u201d<\/p>\n<p class=\"css-at9mc1 evys1bk0\">There are other repayment plans that can lower your monthly obligation: <a class=\"css-yywogo\" href=\"https:\/\/studentaid.gov\/manage-loans\/repayment\/plans\/graduated\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">graduated repayment<\/a>, where payments start lower and rise over time, and <a class=\"css-yywogo\" href=\"https:\/\/studentaid.gov\/manage-loans\/repayment\/plans\/extended\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">extended repayment<\/a>, which lowers the monthly payment by lengthening the loan term.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Simply <a class=\"css-yywogo\" href=\"https:\/\/studentaid.gov\/manage-loans\/consolidation\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">consolidating your loans<\/a> can also lower your monthly payments by extending the repayment period, but there are drawbacks. You may have a higher interest rate on all of your debt, and you\u2019ll end up paying more overall.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">And Ms. Shafroth, of the law center, said she would be wary of consolidating until it was clear whether the latest legal development would block all income-driven repayment regulations introduced in 2023. Those rules included a provision that protected borrowers from losing all of their payments that counted toward cancellation of income-driven loans. Before the rule, loan consolidation restarted that clock.<\/p>\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-63c2b130\">Will I be penalized if I cannot recertify my loans?<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">Each year, borrowers enrolled in income-driven repayment plans must <a class=\"css-yywogo\" href=\"https:\/\/studentaid.gov\/help-center\/answers\/article\/icr-plan-income-family-size-recertification\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">recertify their income<\/a> or face negative consequences, including being kicked out of the repayment plan. But those applications are also not available right now.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-6\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">For now, it\u2019s not something you need to worry about, Mr. Buchanan said. The loan servicers have been instructed to push back those deadlines on a month-by-month basis, and will be in touch with borrowers when they receive more clarity from the Education Department.<\/p>\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-39a8d57e\">The Trump administration is focused on cutting programs. Won\u2019t it stop defending the SAVE plan in court?<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">It would seem logical. But several student loan experts said the administration might have strategic reasons to keep SAVE alive, at least for a while. Republicans may be able to make changes to the program through the enormous budget package that Congress will attempt to pass using a process known as reconciliation. That may enable Republicans to capture and cut the projected spending from SAVE to fund other initiatives.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cThere is interplay between this and reconciliation, where I think they are trying to legislate SAVE off the books to pay for tax cuts for billionaires, instead of ending the program through the courts,\u201d said Persis Yu, deputy executive director of the Student Borrower Protection Center, an advocacy group.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">The Education Department did not immediately comment.<\/p>\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-7deaa3b\">If I\u2019m in a plan like SAVE that may close, will I be grandfathered in?<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">It\u2019s hard to know exactly what will happen. When the Biden administration replaced the REPAYE income-driven repayment plan with the SAVE program, REPAYE enrollees were automatically transferred into the new plan. But in that case, they were receiving improved terms.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Still, it may be more difficult to take something away. \u201cIt\u2019s too soon to say for sure,\u201d said Ms. Shafroth, of the law center. \u201cExisting borrowers may have contractual rights to the key benefits in these programs, regardless of whether they\u2019re currently enrolled in them.\u201d<\/p>\n<p class=\"css-at9mc1 evys1bk0\">That may be why proposals to streamline income-driven programs have typically grandfathered in existing borrowers, she added, and eliminated the plans only for new borrowers.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Federal student loan borrowers are temporarily unable to apply to income-driven repayment plans, a decades-old safety net that ties their monthly loan payment size to household income levels, as the U.S. Education Department reviews a recent federal court ruling. The department closed applications to the repayment plans last week after the U.S. Court of Appeals [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":1017,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[739,738,425,737,412,740,736],"class_list":["post-1016","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-loan","tag-affordable","tag-blocked","tag-borrowers","tag-loan","tag-plans","tag-repayment","tag-student"],"_links":{"self":[{"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/posts\/1016","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/comments?post=1016"}],"version-history":[{"count":0,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/posts\/1016\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/media\/1017"}],"wp:attachment":[{"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/media?parent=1016"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/categories?post=1016"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/tags?post=1016"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}