Eliza Haverstock, Nald Wallet
The US education division has deleted online and paper applications for all income-driven repayment (IDR) plans on February 21 following the latest legal ruling in the case against the new IDR plan (save).
“The Federal Circuit Court of Appeals has issued an injunction that prevents the U.S. Department of Education from implementing parts of its SAVE plan and other income-driven repayment (IDR) plans. The department is considering repayment applications to comply with the 8th Circuit decision. As a result, integrated IDR and online loan applications are currently unavailable,” a spokesperson for the Education Department said.
This means that borrowers are currently unable to apply for either SAVE or three other IDR plans.
The online IDR application was not available from July to September last year. There was a processing delay, but the paper IDR application remained as a workaround afterwards.
“This time, the risk of harm to borrowers is much higher,” says Abby Shafross, co-director of advocacy at the National Center for Consumer Law. The temporary student loan “at the lamp” that prevented borrowers who missed payments from delinquent or entering default ended on September 30, so borrowers who cannot afford standard payments but are blocked from applying for IDR plans could be unfairly punished, she says.
The following are the options that are affected by the IDR application suspension:
Borrowers who need to recertify their IDR plan income
All IDR plan borrowers must recertify their income each year. This must be done through a typical IDR application. They can’t do that now.
As a result, some borrowers of an IDR plan may be punished except for their own negligence. Borrowers who missed the risk of recertifying deadlines can be kicked out of their IDR plans and view the balance balloons with capitalized interest, Shafross says. (If you leave the IBR plan, interest will be capitalized.)
According to the latest education department guidance, borrowers who have at least one loan on a save plan don’t have to worry yet.
Student loan servicers are waiting for the education department to provide guidance on recertifying three other IDR plans, says Scott Buchanan, executive director of the Student Loan Service Alliance. However, he expects the recertification deadline will be pushed back for all IDR borrowers.
In the meantime, servicers will help them work with borrowers with looming certification deadlines to avoid being punished, Buchanan says.
“If (the borrower) has a recertification date, you’ll reach out to the servicer and say, ‘Hey, what can we do here?” That’s because it changes every day,” Buchanan says. Once the servicer has obtained government guidance on IBR, ICR and Paye recertification deadlines, he says, he will contact the borrower so he will keep an eye on his inbox.
What you can do
Call the servicer to make sure your contact information is up to date. If there are future deadlines, ask about your reauthentication options. Wait for more information to come out. In the past, the education sector has suspended deadlines for recertification during periods of uncertainty.
Recent alumni who want to sign up for IDR plans
Borrowers who just graduated or left university last spring have recently begun paying off their student loans. Typically, they will choose a student loan repayment plan that includes an IDR plan that charges monthly payments at a certain percentage of discretionary income.
Instead, borrowers must choose between the default standard 10-year plan, graduation plan, or extension plan. Payments for these plans can be much higher than IDR payments, especially for recent graduates who are still earning job hunting or entry-level salaries.
What you can do
Please quote your payment. Use the Education Department’s loan simulator to assess what monthly payments are possible based on three non-IDR plans, standard, extension and graduation repayments. Stay tuned for news about the IDR application. You will be required to apply for an IDR plan when you resume. Ask the servicer for guidance. You can request a plan with the lowest monthly payment. Please consider postponing it. If you don’t have a job yet, you can suspend your payments with unemployment postponement, but interest increases and totals increase.
Borrowers who need lower payments
In the past, borrowers who have paid more affordable prices than their income can switch from their standard 10-year repayment plans to IDR plans.
“If there is no IDR plan, that safety net will be removed and borrowers may follow a path of delinquency and default,” said Karen McCarthy, vice president of public policy and federal relations at the National Association of Student Financial Aid Administrators.
Currently struggling borrowers can only rely on postponements or shelter to be saved from unmanageable payments. In most cases, interest increases during these suspensions, increasing the amount borrowers are owed in the future.
“These are temporary stopgaps,” says McCarthy. “They’re not a long-term plan, not a repayment plan like an income-driven repayment plan.”
What you can do:
Defer or suspend payments with tolerance. Interest may be built and the overall amount you pay increases, but debt is not the default. Deferrals are usually a better choice than tolerance. Because interest is unlikely to build, certain conditions must be met to qualify. Please avoid being late in making payments. Simply failing to pay federal student loans can lead to delinquency or default. First, request tolerance or postponement.
Borrowers who want to consolidate student loans
Borrowers can still submit paper consolidation applications, but servicers are not permitted to process them now, Buchanan says.
The consolidation allows multiple federal student loans to be replaced with a single federal student loan. This is different from refinancing, which replaces one or more student loans with a single private student loan. If you have old federal loans like FFELP loans, you will need to integrate them before you can access IDR plans or public service loan forgiveness (PSLF).
However, even if you can apply for integration right now, it doesn’t mean you need it. Shafross suggests that borrowers will refrain from consolidation until they know whether the education sector will continue to protect the consolidation borrower from losing all previous credits they have acquired towards IDR forgiveness.
What you can do
Wait for more information. Because you can’t register with IDR right now anyway, you can consider waiting until the education department has clarified its position on counting pre-integration payments for PSLF and IDR allowances. If necessary, submit a paper integrated application form. Print and fill out the PDF version of the integrated application and send it directly to the servicer. Expect processing delays.
Save borrowers who wish to receive PSLF credit
Save plan borrowers have been suspended from interest-free payments since the summer when the lawsuit first blocked plans. These relief borrowers have taken breaks from student loan bills, but have not made any progress towards PSLF. This allows the borrower’s remaining student debt after working for an unqualified non-profit employer for ten years.
In recent months, SAVE borrowers have been able to earn PSLF credits again by switching to another IDR plan, such as PAYE, IBR, and ICR. But they no longer have that option.
What you can do
Switch to a standard repayment plan. The months spent on a standard repayment plan count towards PSLF, but payments can be much higher than in a save plan. Use the Education Department loan simulator to estimate your payments. Also, since the standard plan has a ten-year term, you wouldn’t want to stay with this plan for the entire semester. Alternatively, you can pay back all your debts by the time you reach the 10-year PSLF finish line. Switching to standard planning is also a good option if you are only a few months away from getting permission in PSLF. Check out PSLF buybacks. If you recently hit the PSLF finish line for 10 years, you can use PSLF buybacks to get a credit for your payment during SAVE’s generosity.
Other ways to get help
This is an evolving situation for borrowers. For the latest updates and personalized guidance, consider these ways to get help with student loans.
Please call the servicer. Your servicer is your best contact for any questions regarding student loan repayment options. The name of the assigned servicer is displayed in the sustentaid.gov dashboard. Prepare and take notes during the call before calling your caregiver in case of problems occur in the future or if you need to file a student loan complaint. Please contact your university’s financial aid department. University financial aid officers can help them walk through repayment options, even if they left campus a few years ago, McCarthy says. But they can’t help them to apply for things like tolerance or postponement in the end. To do this, you have to work with the servicer. Please contact your borrower support organization. Reviewed nonprofits like the National Consumer Law Center provide resources to enable borrowers to navigate repayment options. State-based student loan ombudsman. If you have an Ombudsmen office for Student Loans in your state, you may be able to help you with issues or complaints.
Eliza Haverstock writes for Nald Wallet. Email: ehaversstock@nerdwallet.com. Twitter: @elizahaversstock.
The article’s income-driven repayment application has been closed, and student loan borrowers have originally appeared on Nerdwallet.
Original issue: March 11, 2025, 4:05pm EDT
