1.9 Million People Stuck In Student Loan Forgiveness And Repayment Limbo Get Some Key Updates

Nearly two million federal student loan borrowers pursuing lower payments and loan forgiveness have been stuck in processing limbo, in some cases for nearly a year. But after a flurry of recent developments this month, these borrowers may finally start to see some movement in the coming weeks.

The turmoil stems from ongoing issues involving income-driven repayment plans. IDR is an umbrella term describing a collection of four separate programs – ICR, IBR, PAYE, and SAVE – that offer borrowers affordable payments tied to their income and family size, and (historically) a pathway to eventual student loan forgiveness. Typically, borrowers can qualify for loan forgiveness after 20 or 25 years in repayment. That timeline can be shortened to as little a 10 years for borrowers who pursue Public Service Loan Forgiveness, a separate program geared toward those working in lower-paying nonprofit and government jobs. Borrowers usually must be enrolled in an IDR plan to pursue PSLF.

Because of an ongoing legal challenge involving the SAVE plan, more than eight millions borrowers were thrown into a forbearance last summer after a federal appeals court blocked the program. In response, the Department of Education temporarily suspended IDR processing, which then resumed again a few months later. Subsequently, that same court issued another ruling in February expanding the order blocking SAVE. In response, the department shut down IDR processing yet again. This has prevented millions of borrowers from accessing lower payments and maintaining progress toward student loan forgiveness for IDR plans and under PSLF.

With all the recent new developments, here’s where things now stand, and what student loan borrowers should expect in the coming weeks.

IDR Processing Pause Has Blocked Lower Payments And Student Loan Forgiveness

The IDR processing system has mostly been suspended since last summer, when a federal appeals court issued its first order blocking the SAVE plan. The Department of Education had to update the IDR application and processing systems to comply with the order. Once that happened, processing resumed in the fall. But the department shut down the system yet again in February after the appeals court issued another ruling expanding the block on the SAVE plan.

The IDR processing suspensions have caused major disruptions for borrowers across the board. Those who were enrolled in SAVE and want to change to a different IDR plan to resume making progress toward loan forgiveness, including through PSLF, have been largely unable to do so. Borrowers who need to have their IDR payments recalculated due to a change in financial circumstances (something that borrowers are legally entitled to do) are stuck with their current payment amount. And recent graduates and those who are struggling with their payments under fixed repayment plans cannot enroll in IDR or start making progress toward eventual student loan forgiveness.

“These challenges have jeopardized borrowers’ ability to enroll in income-driven repayment (IDR) plans, which offer more affordable monthly payments to help borrowers stay current on their payments and avoid delinquency or default,” said The Institute For College Access and Success in a blog post earlier this month. “Applications for all income-based plans—even those unrelated to the SAVE-driven lawsuits—were shut down for more than a month, and while applications re-opened in late March, servicers are still not processing them. Even before the applications were shut down, borrowers were facing long delays between applying for a plan and being enrolled in one, with the processing backlog growing by the day. Borrowers report facing extraordinarily long wait times when they reach out to their servicers, with some spending eight-plus hours on hold waiting to speak to customer support.”

IDR Processing Will Resume For Student Loan Borrowers In May, But Now There’s A Huge Backlog Of 1.9 Million Applications

Earlier this month, in response to a lawsuit brought by the American Federation of Teachers challenging the Department of Education’s renewed suspension of IDR applications, a top department official indicated that servicers will resume processing of applications for the ICR, IBR, and PAYE plans by May 10 (the SAVE plan remains blocked, so borrowers cannot apply).

“Education directed its servicers to resume placing borrowers that apply for ICR, PAYE and IBR into their respective plans as soon as possible,” says a sworn declaration by the Acting Under Secretary of Education. “At present, based on information provided by servicers, Education expects that servicers will be able to resume doing so by May 10, 2025.”

But advocacy groups are concerned that given the multi-month processing pause, there is now a massive backlog of pending IDR applications. The Department of Education acknowledged this backlog in a statement released this week, and for the first time, released a specific figure for impacted borrowers.

“Currently, almost 1.9 million borrowers have been unable to even begin repayment” because of the processing pause, said the department. In its statement, the department blamed the Biden administration for the IDR processing pause, but left out the fact that it was the Trump administration that reimposed the processing pause after the 8th Circuit issued its latest ruling in February.

“Because the Eighth Circuit’s order directed the injunction of provisions that applied to other IDR plans, in order to prepare to comply with anticipated injunction from the Eastern District of Missouri, Education had to temporarily disable the online and paper application process for all IDR plans” in February, reads the Acting Under Secretary of Education’s sworn declaration, contradicting the department’s public statement that the Biden administration was to blame.

Attorneys for the AFT indicated during a court status conference last week that the union is working with the Department of Education to create an information-sharing agreement that would allow it to monitor the department’s progress in working through the 1.9 million pending IDR applications once processing resumes in May. If the parties are unable to reach an agreement, the AFT expects to continue with its legal challenge.

Unspecified Improvements May Be Coming For Student Loan Borrowers Applying For IDR Plans Next Week

The Department of Education also indicated this week that officials are working on unspecified improvements to the IDR application process that may make it easier for borrowers to apply.

In addition to outreach efforts, the department will “launch an enhanced Income-Driven Repayment (IDR) process, simplifying the time that it will take borrowers to enroll in IDR plans and eliminating the need for borrowers to recertify their income every year,” said the department in a statement on Monday. “More information will be posted on StudentAid.gov next week.”

It is unclear what, specifically, the department may be referring to. But it could be referencing a data-sharing tool between the IRS and the department that would allow student loan borrowers to import their income information from their federal tax return into their IDR application without the need to upload documentation of their income. The data-sharing tool would also allow borrowers to opt into automatic annual income recertification (rather than manually recertifying their income each year) by giving permission for the IRS to periodically share income data with the department. The IRS data-sharing tool was taken down last year by the department when the first IDR processing pause went into effect, and has been offline since then.

Changes May Be Coming To Student Loan Forgiveness Rules

While the resumption of IDR processing and possible improvements to the application process may be reasons for student loan borrowers to be cautiously optimistic, despite the large backlog of applications, there are also reasons to remain concerned. The Department of Education is poised to initiate a process to change the rules for several IDR and loan forgiveness programs – specifically, the ICR and PAYE plans, as well as PSLF. A key public hearing is scheduled for next week.

The Department of Education has not provided specific information on proposed changes to these programs. However, officials are likely going to take steps to try to implement President Trump’s executive order directing the department to limit eligibility for student loan forgiveness through PSLF based on an organization’s activities. And the department may also try to end student loan forgiveness under the ICR and PAYE plans, given the February ruling from a federal appeals court that questioned the department’s legal authority to provide loan forgiveness under those plans. Eliminating student loan forgiveness through ICR and PAYE would dramatically reverse more than 30 years of federal regulations and public assurances provided to borrowers by both Republican and Democratic administrations.