Repayment plan processing for hundreds of thousands of federal student loan borrowers trying to enroll in income-driven repayment plans should finally be back in full swing as of Saturday, according to the Department of Education. That’s good news for borrowers who had been prevented from accessing affordable monthly payments and pathways to student loan forgiveness following months of chaos.
The ongoing problems were associated with the fallout from a legal challenge over the SAVE plan, one of several income-driven repayment plan programs that offer borrowers lower payments based on their income and family size, and eventual student loan forgiveness (typically after 20 or 25 years). Income-driven plans are also usually required for borrowers enrolled in Public Service Loan Forgiveness, a separate program that can shorten the student loan forgiveness timeline to as little as 10 years for those who commit to full-time nonprofit or government work. A federal appeals court issued an injunction earlier this year extending a block on the SAVE plan that had been in effect since last summer. That, in turn, led the Department of Education to temporarily shut down the entire income-driven repayment plan application system.
But as of Saturday, the IDR application system should be fully back up and running, according to assurances made by top department officials. Here’s what student loan borrowers should know.
Lower Payments And Student Loan Forgiveness Had Been Blocked For Months Under IDR Plans
In February, the Department of Education took down the applications for income-driven repayment plans and halted all processing after a federal appeals court blocked Biden-era regulations governing the SAVE plan. Even though the associated legal challenge technically is only about the SAVE plan, the Trump administration had argued that the associated regulations impacted the other income-driven plans, as well – ICR, IBR, and PAYE.
“The latest court actions significantly affect preexisting ED rules on its loan programs and IDR plans,” the Department of Education said in guidance it updated last week. “As a result, the IDR and online loan consolidation applications were temporarily unavailable.” The department argued that the injunction impacted repayment plan calculations for ICR, IBR, and PAYE, even though only SAVE itself was enjoined by the court.
In response to the department’s systemwide IDR application shutdown, the American Federation of Teachers filed a lawsuit against the Trump administration, arguing that the Department of Education’s actions were unlawfully preventing millions of federal student loan borrowers from applying for IDR plans, requesting payment recalculations, recertifying their income, or switching plans. In particular, millions of borrowers who had enrolled in SAVE and were put into an involuntary forbearance last summer due to the legal challenge were unable to switch to IBR or other income-driven plans to resume progress toward student loan forgiveness, including for PSLF.
Student Loan Borrowers Can Now Access Three Income-Driven Repayment Plans
After the AFT filed its lawsuit, the Department of Education changed course and restored access to the IDR application, but only for the ICR, IBR and PAYE plans, as SAVE remains blocked. However, processing of applications did not immediately resume. Then, in April, a top department official filed a sworn declaration indicating that IDR processing for the ICR, IBR, and SAVE plans would fully resume by May 10th.
“Education directed its servicers to resume placing borrowers that apply for ICR, PAYE and IBR into their respective plans as soon as possible,” said the declaration. “At present, based on information provided by servicers, Education expects that servicers will be able to resume doing so by May 10, 2025.”
Anecdotal reports indicate that some loan servicers started processing IDR applications weeks ago, and some borrowers trying to leave the SAVE plan forbearance have started to be moved into IBR as of this week. Payments made under the SAVE plan that counted toward student loan forgiveness should also count toward student loan forgiveness under IBR.
“Borrowers can have their loans forgiven if they are enrolled in the IBR Plan,” says the department in its updated guidance. “Payments on PAYE, SAVE, and ICR are counted toward IBR Plan forgiveness if the borrower enrolls in the IBR Plan.”
While applications for ICR, IBR, and PAYE should be processed, it is unclear at this juncture how loan servicers will handle earlier versions of IDR applications where borrowers may have selected the SAVE plan or an alternative option that allows their servicer to pick their repayment plan for them based on the lowest available monthly payment. Neither of those options are available on the updated version of the IDR application that the Department of Education released last month.
Student Loan Repayment Plan Processing Will Be Monitored By Court
Student loan borrower advocacy groups, including the AFT, have remained concerned that despite the Department of Education’s assurances that IDR processing is resuming for the ICR, IBR, and PAYE plans, borrowers may experience lengthy processing times. The department indicated last month that there is now a backlog of nearly two million IDR applications.
“Education does not currently have an estimated date for when servicers will have completed processing the backlog of IDR applications,” reads the department declaration submitted in April. “This timeline is due to the servicers’ internal procedures. Specifically, before servicers can begin to process applications, they must update the processing rules in their systems according to the terms of their contracts with Education.”
The good news for borrowers, however, is that the AFT and the department reached an agreement in the AFT’s legal challenge for the department to provide concrete updates, in publicly available status reports filed with the court, on loan servicers’ progress in processing IDR applications. The first such status report is due later this week.
“Defendants’ first status report shall be due on May 15, 2025, and subsequent status reports will be due every 30 days thereafter,” reads the joint status report submitted by the AFT and the Department of Education in April. Each status report will include information on “the number of income-driven repayment (IDR) applications that were pending at the end of the preceding month” and “the number of IDR applications that were decided (that is, approved or denied) during the preceding month.”
“After the filing of the third status report, the parties will confer about the need for further reporting, and (if necessary) will jointly or separately request relief from the Court to terminate or modify the reporting obligation,” reads the joint status report. This essentially means that if IDR applications are being successfully processed, court monitoring may end. If processing is insufficient, the AFT may seek further recourse through the court.
The joint status report also indicates that the Department of Education will provide periodic updates on applications for PSLF Buyback, a program that allows borrowers to request student loan forgiveness credit for certain non-qualifying deferment and forbearance periods. As with IDR, PLSF Buyback application processing has been largely stalled since last summer, with an unclear number of borrowers stuck in limbo. These borrowers may get more information in the coming days on where things stand with their application.
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