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.