Department Of Education Reveals 96% Of Student Loan IDR Applications Remain Unprocessed

The Department of Education revealed on Thursday that 96% of income-driven repayment requests for more than two million student loan borrowers remain unprocessed, as loan servicers struggle to work through a massive backlog of applications. And the situation may be about to get much worse.

The information was unveiled in a court-ordered filing this week in an ongoing legal challenge brought by a national teacher’s union over stalled IDR applications. The union and the department had reached an agreement whereby the litigation would be paused while the department releases publicly available updates on IDR processing every 30 days. This week’s filing represents the department’s first progress report after IDR application processing resumed several weeks ago. The filing also included a progress update on the processing of applications for the PSLF Buyback program, which similarly showed that the vast majority of requests for student loan forgiveness submitted by borrowers remains unprocessed.

The slow progress does not bode well for federal student loan borrowers, as a two million IDR application backlog may be relatively small compared to the massive reshuffling of repayment plans that may be required under legislation proposed by Congressional Republicans.

Massive Backlog Of IDR Applications Means Student Loan Borrowers Remain Stuck In Limbo

The issues with IDR applications stem from a long-running legal challenge brought by a coalition of Republican-led states over the SAVE plan, a Biden-era program that was intended to be the most affordable income-driven repayment option. IDR programs offer borrowers affordable payments tied to their income with the possibility of eventual student loan forgiveness, usually after 20 or 25 years in repayment.

But a federal court’s injunction blocking the SAVE plan has upended IDR plans and caused chaos for millions of federal student loan borrowers. In response to the court’s broad order, the Department of Education effectively shut down the entire IDR application system. Borrowers enrolled in SAVE, who have been forced into a forbearance since last summer as a result of the legal battles, aren’t the only ones impacted. Applications for the ICR, IBR, and PAYE plans have also been affected.

A national teacher’s union sued the Trump administration in March over the IDR shutdown, arguing it was illegal. In the suit, the union provided sworn declarations from student loan borrowers who were prevented from enrolling in affordable repayment plans mandated under federal law, putting them at risk of delinquency or default. Other borrowers who wanted to change repayment plans – such as those stuck in the SAVE plan forbearance – have been prevented from doing so. And the union argued that the IDR systemwide shutdown was effectively preventing borrowers from accessing Public Service Loan Forgiveness (or PSLF), a student loan forgiveness program that usually requires borrowers to enroll in an IDR plan. The Department of Education argued that the shutdown was temporary and was essentially required as a result of the recent court ruling blocking the SAVE plan.

Last month, the union and the department reached an agreement. The department indicated IDR application processing was resuming, and agreed to provide monthly progress reports with detailed information on how many IDR applications were processed the previous month, and how many applications remain. The lawsuit would be stayed to allow the parties to gauge this progress.

On Thursday, the department released its first progress report. During the month of April, only 79,349 IDR applications out of 2,065,075 were processed. That means that more than 96% of IDR applications remain unprocessed. At this rate, it would take the department more than two years to get through the backlog – and that assumes student loan borrowers don’t submit additional IDR applications during that time, which of course is unrealistic.

Similar Backlog For PSLF Buyback Applications Keeps Borrowers From Accessing Student Loan Forgiveness

In the same progress report, the Department of Education also released information on the progress for PSLF Buyback applications. PSLF Buyback is a new program created under the Biden administration that allows borrowers pursuing student loan forgiveness based on their public service work to make a lump sum payment covering certain periods of deferment or forbearance that normally wouldn’t count (borrowers typically must be in an income-driven repayment plan while working in eligible public service employment for the time to count toward student loan forgiveness). Borrowers can’t apply for PSLF Buyback until they have at least 120 months of qualifying employment, the equivalent of 10 years.

PSLF Buyback has not been challenged in court, and is not blocked or enjoined under any court order. Nevertheless, many borrowers have reported no action on their PSLF Buyback applications, in some cases for nearly a year. In particular, those who are stuck in the SAVE plan forbearance who would have otherwise qualified for student loan forgiveness under PSLF have tried to utilize the PSLF Buyback program to get them to the finish line. The Department of Education has provided no public explanation for the delays, although it could be at least partially related to mass layoffs instituted by the Trump administration, which may have diminished the capacity of the remaining department staff to review applications.

In Thursday’s status report, the Department of Education confirmed what many federal student loan borrowers had suspected: the vast majority of PSLF Buyback requests remain unprocessed. The department revealed that it has only processed 1,472 PSLF Buyback applications out of 50,790 as of April 30. At that rate, it would take the department nearly three years to process the remaining applications.

Even Bigger Disruptions May Be Coming For Federal Student Loan Repayment Programs

The numbers the department released this week may be concerning to student loan borrowers. But it also suggests that the federal student loan system may be in for even more significant disruptions in the coming months.

Congressional Republicans released draft legislation last month that would fundamentally reshape the federal student loan system, and force millions of borrowers to change repayment plans. Under the proposal, the SAVE plan, the ICR plan, and the PAYE plan would all be eliminated, as would a newer version of IBR for borrowers who first took out federal student loans in 2014 or later. All of these borrowers would be moved into a modified version of the IBR plan. The legislation would also created a new income-driven plan that would feature its own separate repayment formula and a 30-year repayment term.

More than eight million student loan borrowers are enrolled in the SAVE plan alone, with millions of additional borrowers enrolled in ICR, PAYE, and the newer version of IBR. At the rate the Department of Education and its contracted loan servicers are currently processing IDR applications, it could take 10 years for these massive changes to be processed.

That may be unlikely, and the Department of Education may argue that IDR processing is just ramping up. It’s quite possible that next month’s progress report may reveal a significantly faster application processing rate for both IDR plans and for PSLF Buyback. But for the millions of student loan borrowers stuck in limbo or enrolled in one of the other IDR plans that could be affected by proposed legislative changes, the information the department released this week does not bode well.