Summary
- The U.S Education Department has suspended student loan
forgiveness under the Income-Based Repayment (IBR) plan with no timeline
for resumption. - IBR is the only income-driven plan still processing
forgiveness; about 2 million borrowers are enrolled. - Suspension is due to system updates intended to account
for court injunction impacts on other plans like SAVE. - Other income-driven plans like SAVE, PAYE, and ICR
remain blocked by court rulings challenging their legality. - Borrowers face uncertainty, delays, and potential
continued payments despite qualifying for forgiveness.
With the promise of loan forgiveness after 20 or
25 years of payments, Income-Based Repayment is one of four federal plans that
tie monthly payments to family size and wages.
According to the department, it is the only
income-driven plan that is still processing loan forgiveness because it is
unaffected by a court injunction. The plan has over 2 million borrowers
enrolled.
But in an FAQ updated earlier this month, the
department said:
“IBR forgiveness is paused while our systems are updated to
accurately count months not affected by the court’s injunction. IBR forgiveness
will resume once those updates are completed.”
Questions concerning the timeline and
developments were not immediately answered by the Education Department.
According to a number of student loan servicers,
the businesses the government has hired to collect loan payments, they have not
yet received any information regarding the suspension. Some pointed out that
because of the White House‘s delay, the agency hasn’t requested them to handle
debt forgiveness for any consumers since mid-January.
After an appeals court upheld and extended a
temporary suspension of Save, the department ceased to discharge debts under
the other three income-driven plans: Income-Contingent Repayment, Pay As You
Earn, and Saving on a Valuable Education. Since last summer, when a group of
Republican-led states challenged the legality of the Biden-era plan, which
offers reduced payments and a quicker path to loan forgiveness, it has been put
on hold.
The states contended that the 1993 law that
President Joe Biden used to establish Save did not permit loan forgiveness. The
courts also questioned the constitutionality of the forgiveness element in
those programs, despite the fact that they had been in place for decades,
because the same statute gave rise to ICR and PAYE.
Since Congress specifically permitted debt
forgiveness at the conclusion of the repayment term, IBR, which was established
in 2007, was exempt from the litigation.
The Education Department has been urging
borrowers who are interested in loan forgiveness to participate in IBR,
particularly the 7.7 million who are enrolled in Save, as it is not bound by
the convoluted web of legal cases surrounding student loans.
Starting Aug. 1, interest will resume accruing
on loans in the Save program, even though enrollees’ payments remain paused by
the court injunction. President Donald Trump signed a tax package this month
that terminates Save and gives subscribers until 2028 to exit the plan, despite
the fact that the dispute is still pending.
IBR may experience a surge of debtors due to the
impending interest accrual and the collapse of Save. Without a clear route to
forgiveness, those borrowers may find themselves stuck in another plan if the
suspension on loan forgiveness is not promptly lifted.
How will the pause affect borrowers awaiting
loan forgiveness under IBR?
The pause on student loan forgiveness under the
Income-Based Repayment (IBR) plan has left borrowers who have met the
forgiveness criteria in uncertainty and delay. Thousands of borrowers who have
completed the required 20 or 25 years of qualifying payments cannot currently
receive their loan discharge, causing continued monthly payments or
accumulation of interest if they opt for forbearance while waiting.
Because the suspension is officially attributed
to “system updates” needed to align with court rulings affecting related plans,
forgiveness processing has stopped indefinitely with no clear timeline for
resumption. Borrowers may continue making payments and, once forgiveness
resumes, could potentially get refunds for payments made beyond the maximum
required amount.
However, interest continues to accrue during
this pause, increasing overall debt burdens.
