The status of loan forgiveness for students on income-based repayment schemes?
In a recent development, the Department of Education has announced a temporary pause in student loan forgiveness under the Income-Based Repayment (IBR) plan and related repayment plans such as the SAVE Plan and Income-Contingent Repayment (ICR). The pause is due to system updates required to comply with ongoing court injunctions linked to litigation against the Biden administration’s SAVE Plan.
The IBR plan, created separately from other existing repayment plans, offers forgiveness after 240 or 300 monthly payments, depending on when borrowers enrolled. However, forgiveness under the IBR plan has been temporarily paused while the Department of Education updates its systems. This pause is to ensure that calculations align with the injunction affecting related plans.
The SAVE Plan, which allowed cheaper payments and faster forgiveness, has been blocked by courts since July 2024, and its forgiveness is fully halted. Borrowers on the SAVE Plan cannot currently receive loan benefits or make progress toward discharge programs. Other income-driven plans, such as ICR, are also affected by the injunction, with forgiveness currently blocked under those plans as well.
Borrowers enrolled in the IBR plan who have reached the threshold for forgiveness but are not seeing their loans discharged as a result of the pause may continue to make payments with the expectation that the Education Department will refund the excess payments once forgiveness resumes.
The IBR plan is exempt from some changes coming from President Donald Trump’s tax and spending bill, which will phase out the ICR, PAYE, and SAVE plans, replacing them with the Repayment Assistance Plan (RAP). The Education Department hasn’t given a timeline for when its system update will be complete and forgiveness will resume.
It is important to note that the IBR plan is not part of the plans affected by the court’s injunction. The legal action against the SAVE, ICR, and PAYE plans questions whether student loan forgiveness is authorized under the federal statute that governs those plans.
Borrowers who are affected by this pause can request forbearance from their loan servicer, in which case interest would continue to accrue on any remaining balance. As always, it is recommended that borrowers consult with their loan servicers or financial advisors for personalised advice.
In summary, forgiveness is paused for all income-driven repayment plans that include SAVE and ICR, and temporarily paused under IBR while system updates are made; no forgiveness is proceeding for SAVE plan borrowers due to the injunction. Borrowers who make payments after becoming eligible during the pause will receive refunds once forgiveness restarts.
Personal-finance enthusiasts in the midst of education-and-self-development might find it crucial to keep track of recent developments in student loan forgiveness plans. For instance, the Department of Education's temporary pause in forgiveness under the Income-Based Repayment (IBR) plan and related plans such as the SAVE Plan and Income-Contingent Repayment (ICR) is a key point to learn about in this regard. Though forgiveness under the IBR plan has been paused, continued learning about personal-finance strategies like consulting financial advisors for personalized advice can help borrowers navigate through such financial obstacles.
