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Forbes
21-05-2025
- Business
- Forbes
Major Update For 9 Million Borrowers About Huge Student Loan Forgiveness Threat From PSLF And IDR Delays
A growing backlog in PSLF and IDR processing is delaying student loan forgiveness and putting public ... More servants' eligibility at risk As millions of public service workers anxiously await promised student loan forgiveness, a new threat has emerged: due to massive processing delays in federal forgiveness programs, many borrowers may lose eligibility even after making 120 qualifying payments. When forgiveness is granted, the Public Service Loan Forgiveness program requires borrowers to be still employed by a qualifying public service employer. Now, lengthy delays in processing Income-Driven Repayment and PSLF buyback applications mean that borrowers who have already completed a decade of service or are close to it could be denied forgiveness, not because their payments won't count, but because they might retire, change jobs, or get laid off before the government finalizes their discharge. This is another headwind for the over 9 million public service workers with federal student loans eligible to pursue PSLF, the 1.3 million of those who are actively pursuing it, and the 50,000 borrowers currently waiting for their PSLF buyback applications to be processed. New data reveal a historic backlog in student loan forgiveness processing. In a recent court-mandated status report, the Education Department admitted that as of April 30, it had approved only around 79,000 IDR plan applications, while nearly 2 million applications remain unprocessed. This 96% backlog has effectively paralyzed the IDR enrollment system and, by extension, PSLF forgiveness for many borrowers. Even if all 120 qualifying payments have been made, forgiveness cannot occur until these applications are reviewed and approved. The logjam has created a severe student loan forgiveness delay for anyone relying on IDR or PSLF programs to cancel their debt after years of payments. PSLF borrowers are acutely impacted. Under newly expanded rules, PSLF applicants can retroactively buy back specific past periods, for example, months spent in deferment or forbearance, to count toward their 120-payment requirement. But progress has been glacial: 49,318 PSLF buyback requests were pending as of the end of April, and fewer than 1,500 were processed that month. Less than 3% of pending PSLF buyback applications have been resolved, highlighting the severity of the backlog. According to a court filing, these pending cases likely represent about 49,000 public service workers who have met all PSLF requirements and should have their loans canceled under federal law yet remain in limbo. In other words, tens of thousands of teachers, nurses, government employees, and non-profit workers are technically eligible for immediate debt forgiveness, but bureaucratic delays are postponing their relief indefinitely. One major culprit behind the delays is the legal battle over President Biden's new IDR plan, the SAVE plan. Last year, a group of state attorneys general sued to block SAVE, and in February 2025, the Eighth Circuit Court of Appeals issued an injunction halting the plan's implementation. In response, the Education Department abruptly shut down all online IDR applications and halted processing pending requests for weeks, plunging millions of borrowers into uncertainty. During this freeze, no borrower could change into a new IDR plan, even if they needed one to keep their payments affordable or to qualify for PSLF. Access was partially restored by late March after a lawsuit, but officials did not resume processing IDR enrollments until mid-May. The result is a mountain of stalled IDR plan changes that must be cleared. Compounding the issue, roughly 8 million borrowers enrolled in the SAVE plan were placed into a special litigation forbearance status due to the injunction. These borrowers have had their repayment plans paused against their will. Months spent in this limbo typically do not count toward PSLF or IDR forgiveness since no payments are being made. Borrowers had received mixed messages about whether this forbearance time would be credited. The Education Department has now confirmed that time spent in the SAVE plan litigation forbearance can be reclaimed through the PSLF buyback program. However, that is only a partial consolation: to buy back those months, borrowers must make extra lump-sum payments for each month of forbearance and wait for those payments to be processed and credited. Given the significant backlog, it could be many months or even years before affected borrowers see their PSLF counts updated. The PSLF employment requirement is now the core threat to these borrowers' long-awaited forgiveness. Under program rules, a borrower must work full-time for a qualifying public service employer while making the 120 payments, when they apply for forgiveness, and when the forgiveness is officially granted. There is no partial forgiveness in PSLF; it's all or nothing. Usually, this requirement isn't a problem: borrowers apply once they hit 120 payments and receive forgiveness within a few months, all while still on the job. However, the wait could be much longer, with processing grinding to a halt. The risk is that if a borrower retires, switches to a private-sector job, or is laid off before the government finalizes their forgiveness, they could be disqualified from PSLF at the finish line. This delay could impact retirement plans for many public-sector and non-profit workers. It could also stifle mobility as workers facing burnout or better opportunities may feel trapped in their jobs until their debt is cleared. These situations are within the worker's control; however, there's also the unpredictable risk of job loss. Recent budget strains and organizational changes have led to layoffs at federal and state agencies. The Education Department underwent mass layoffs and staffing cuts in early 2025, contributing to the processing slowdown. A public service borrower can do everything right. However, it will still be derailed by an involuntary layoff, a real possibility in today's economic climate, and the stated intention of President Trump's administration to cull the federal workforce. "At least 121,000 federal workers have been laid off or targeted for layoffs in the three months since President Donald Trump's second term began," according to a CNN analysis. "It's a vast number that doesn't count those placed on administrative leave or who took voluntary buyouts," the report noted. Unfortunately, PSLF does not provide a safety net for such cases. You're ineligible if a qualified employer does not employ you at the moment of forgiveness. For now, PSLF seekers should remain in qualifying employment until their student loan forgiveness discharge is completely processed, no matter how long it takes. That may mean postponing retirement or declining a private-sector opportunity for longer. If you have reached 120 payments and submitted your PSLF application, continue working for your public service employer until you see a $0 loan balance. Some services may allow a brief payment forbearance during the wait (so you don't have to make additional payments after 120), but be cautious: any break in qualifying employment before forgiveness is finalized could nullify your approval. If you keep paying past 120 out of caution, the government has said it will refund any overpayments once your loan is forgiven. In short, don't leave your public service job until the finish line is officially crossed.
Yahoo
02-05-2025
- Business
- Yahoo
Student Loans Under Trump: What to Know About the Administration's New Collection Policy
All products featured on Teen Vogue are independently selected by Teen Vogue editors. However, when you buy something through our retail links, Condé Nast may earn an affiliate commission. Richard Stephen Stay up-to-date with the politics team. Sign up for the Teen Vogue Take After five years of relative federal student-debt relief, the Trump administration has decided to go after the most financially vulnerable debtors. Starting May 5, the Department of Education announced, the Office of Federal Student Aid (FSA) will initiate the collections process for debtors who've defaulted on their student loans. For context, as of March — the latest publicly available data on the Department of Education website — the country was managing a total of $1.66 trillion in federal student loans burdening 42.5 million people. According to the administration, only 38% of borrowers are currently repaying their student debt on time. Roughly 4 million borrowers are in late-stage delinquency and more than 5 million are in default. When the Biden administration's Saving on a Valuable Education (SAVE) program was paused earlier this year, some borrowers who were enrolled in the program saw their monthly payments grow exponentially — jumping from $250 to $900 per month, in one instance, and from $500 to nearly $5,000 per month in another, according to a report in Fortune. Some of those borrowers are likely to join the millions of fellow debtors already in default. Here's what we know. As a quick refresher, the Biden White House's highly anticipated, sweeping student-debt relief package got struck down by the Supreme Court in 2023, prompting the administration to switch gears to focus on targeted cancellations for specific categories of debtors. Alongside the high-profile SAVE plan, Biden's team spent the administration's last years making improvements to Income-Driven Repayment (IDR) options and Public Service Loan Forgiveness (PSLF). In July 2024, federal judges blocked major portions of the SAVE plan after challenges were filed by Republican attorneys general, leaving in limbo nearly 8 million borrowers enrolled in the plan. The Biden administration appealed the ruling. Still, by December, the Department of Education announced the administration had successfully cancelled a total of nearly $180 billion in student loans for 4.9 million borrowers using its targeted relief method. Biden's last public action on student debt relief came on January 13, when the White House announced that it had approved relief for more than 150,000 borrowers, including 85,000 debtors defrauded by their schools; 61,000 debtors with permanent disabilities; and 6,100 debtors who work in public service. So, for those keeping count at home, since announcing its debt relief package in 2022, the Biden administration said it was able to cancel about 11% of the country's total federal student-debt burden (about $180 billion) and totally eliminate federal student debt for around 11.7% of borrowers (about 5 million debtors) during Biden's time in office Within weeks of taking office, President Donald Trump began moving forward with his plans to shutter the Department of Education and subsequently laid off about half of the agency's workforce, according to the New York Times. Biden's SAVE plan had already been paused on appeal since the previous summer, but in February, it was essentially blocked indefinitely when a US court of appeals ruled against the Biden administration program. The Trump administration then removed the application for the program from the Department of Education website entirely. Applications for other IDR plans also reportedly disappeared. Weeks earlier, the Department of Governmental Efficiency, or DOGE, reportedly temporarily gained access to the Department of Education's databases and personal information for millions of student loan borrowers — before a federal lawsuit stopped the exchange. A separate March lawsuit filed by the American Federation of Teachers forced the administration to reopen the online applications. The Trump administration has offered mixed signals on which agency will even handle the outstanding federal student-debt balance. In March, White House Press Secretary Karoline Leavitt told a group of reporters that the Department of Education would handle student loans and Pell grants; the very next day, Trump told reporters that the Small Business Association would do so instead. As of now, it appears the FSA will be leading the process. Republicans in the House of Representatives just released a proposal for student repayment that would, as a stipulation of the policy, repeal the SAVE plan. Called the Student Success and Taxpayer Savings Plan, the proposed policy reduces the number of payment plans for the country's millions of debtors down to just two options. The first plan would offer a fixed monthly bill over the course of repayment and the second plan, called the Repayment Assistance Plan (RAP), would be an income-driven repayment plan. According to the proposal, RAP would 'prevent balances from always ballooning,' though the details of how that would be avoided aren't provided. The proposal would also limit the maximum amount of federal student loans for undergraduate students and for Parent PLUS loans at $50,000. If enacted, this proposal would only apply to student loans taken out after July 1, 2026. So far, the administration's actions have matched early plans and intentions outlined in the infamous Project 2025 agenda, but it has yet to implement the document's most destructive student debt-repayment mechanisms: namely, replacing both Biden's SAVE plan and the existing PSLF plan with a far more restrictive and punishing IDR program. As described, Project 2025 proposes reducing the minimum annual income-level requirement for a single person to make student debt payments from $34,000 in the SAVE plan to just $15,000. SAVE's promise to cancel or cover extra unpaid monthly interest above minimum payments in exchange for on-time payments would also be eliminated, meaning rogue interest rates could come back with a vengeance. In addition to nixing PSLF and other 'occupation-based student loan forgiveness' programs, Project 2025 would void any 'time-based' progress, meaning that borrowers who've made monthly payments for a certain number of years to eventually earn full cancellation would lose that benefit completely. In its press release announcing the collections process, the Department of Education mentions 'an enhanced Income-Driven Repayment (IDR) process,' but additional details are forthcoming. If you've already defaulted on your federal student loans, the Department of Education offers two options for you to get out of default: loan consolidation and loan rehabilitation. In both instances, borrowers are eligible to apply for deferment and forbearance periods, rehabilitation plans, loan forgiveness programs, and new federal student aid once the process is completed. But, according to the website, there are a few key differences to consider. Loan consolidation: This process allows borrowers to combine all of their existing federal loans into one giant loan with one monthly payment, and it's a much faster fix than loan rehabilitation. However, the consolidation process will typically capitalize your existing interest, meaning that your unpaid interest will be added to your principal balance, increasing your overall loan and payments. The new interest rate applied to that consolidated loan will essentially require you to pay interest on your old unpaid interest. And, unlike the loan rehabilitation process, consolidating your loans will not remove the negative default mark on your credit score. It is important to note that you cannot consolidate loans that are already being collected through the wage garnishment process. So, if you want to use consolidation on your defaulted loan, the time to move is right now. Loan rehabilitation: This process takes several months, but outstanding interest is not added to your loan and the record of your default will be removed from your credit history once your loan is again in good standing. For direct loans, for example, borrowers must agree to make nine consecutive monthly payments over the course of 10 months at a 'reasonable and affordable' monthly rate determined by your loan holder. For loans held by the Department of Education, borrowers have to request the rehabilitation agreement by mail. Another crucial point: There's a chance the collections process can begin — and can garnish your wages — even while you're making payments through the rehabilitation process. According to the website, collections will stop once you've completed the rehabilitation program but might stop as soon as you've made at least five payments. Before wage garnishment begins, debtors should receive a 30-day notice that the collections process will begin impacting their income. So, in theory, if the collection process the Trump administration is threatening does begin on May 5, your income shouldn't be affected until 30 days after you've been notified. That said, the Education Department's own announcement states the FSA won't begin sending these notices until 'later this summer.' After you get that notification, you can enter a repayment agreement, you can file a request for a hearing, and file a formal objection to the garnishment process. By entering a repayment agreement and making a first payment before the 30 days is up, you might be able to prevent the wage garnishment process from starting at all. Once it begins, the Department of Education can direct your employer to take up to 15% of your take-home pay and give it to the government. Originally Appeared on Teen Vogue Check out more Teen Vogue education coverage: Affirmative Action Benefits White Women Most How Our Obsession With Trauma Took Over College Essays So Many People With Student Debt Never Graduated College The Modern American University Is a Right-Wing Institution
Forbes
28-04-2025
- Business
- Forbes
Major Update For 1.9 Million Borrowers About Student Loan Forgiveness And Repayment Processing
WASHINGTON, DC - MARCH 29: U.S. President Donald Trump greets Small Business Administration head ... More Linda McMahon during an event celebrating Women's History Month, in the East Room at the White House March 29, 2017 in Washington, DC. (Photo by) Nearly two million student loan borrowers remain stuck in repayment limbo, even as the U.S. Department of Education signals a new plan to address the massive backlog of Income-Driven Repayment applications. A recent court filing provided a significant update on how the Department will finally tackle this logjam and offers a timeline for status and data updates. For the 1.9 million borrowers waiting for their application to be processed, every month of delay is a month they cannot get an affordable payment plan or credit toward loan forgiveness, leaving them financially and emotionally in limbo. In an April 25 court filing, which is part of an ongoing lawsuit by the American Federation of Teachers, the Education Department agreed to a series of status reports to publicly track its progress on processing backlogged IDR applications (the agreement is still subject to adoption by the court, but given that both sides were in agreement about the path forward, one would be inclined to believe it will be adopted). The first report is due May 15, 2025; subsequent updates will follow every 30 days. At least three monthly reports will be filed (up to six, absent further court order) to ensure transparency about how quickly servicers tackle the application backlog and hold the Department accountable as it works through it. Each status report will include detailed data on the IDR processing backlog, including: The data the Education Department will provide will be instrumental in calculating the efficiency and throughput of loan servicers, at least directionally, in processing backlogged applications. This should give student loan borrowers visibility on the estimated time it could take for their specific application to be processed and quell the massive uncertainty over the processing timeline. Another significant update is that the first status report in May will include a list of which types of past loan forbearances are eligible for PSLF buyback credit. The Education Department has indicated that loan servicers will soon resume processing IDR applications that are on hold. In a sworn court declaration, an Acting Under Secretary of Education revealed that servicers had been directed to place borrowers into specific IDR plans as soon as possible, with an expected start date of May 10, 2025. This means that after a pause of over two months, borrowers' IDR requests should finally begin to be processed again in May, a critical first step in chipping away at the enormous IDR application backlog. The IDR application backlog has real consequences for those seeking relief. Until processing resumes, affected borrowers cannot access the lower payments that IDR plans offer or make progress toward loan forgiveness. In effect, the logjam has created a severe student loan forgiveness delay for anyone relying on IDR or PSLF programs to cancel their debt after years of payments. Borrowers who reached the finish line for forgiveness have seen their discharges put on hold, and those working toward Public Service Loan Forgiveness have watched the clock stop on counting qualifying payments. "Every day these applications go unprocessed deprives borrowers of critical time toward IDR and PSLF relief and financial stability,' Persis Yu, deputy executive director and managing counsel at the Student Borrower Protection Center, told me in an interview. In other words, each month of delay is one less month that counts toward the 120 payments required for PSLF or the 20- or 25-year clock for IDR loan forgiveness. These delays can cost borrowers thousands of dollars and extend their indebtedness by months or years. As interest accrues and anxiety builds, borrowers are left in an untenable position, stuck making higher payments than they should or in forbearance with no clear end in sight. Borrowers and advocates should now mark their calendars for May 15 when the Department of Education will release the first IDR status report covering the month of April. This report and subsequent ones will highlight the IDR processing effort, showing whether the backlog of pending applications is finally shrinking and by how much. The IDR status report timeline will be one progress report on restoring the student loan system to standard functionality. Borrowers should pay close attention to these updates and see how many IDR applications are getting processed each month, as this will indicate how quickly relief is coming. There are other encouraging signs on the horizon as well. The Education Department has hinted at new measures to streamline IDR enrollment. This week, officials announced in a press release plans to "launch an enhanced Income-Driven Repayment process, simplifying the time it takes to enroll in IDR plans and eliminating the need for borrowers to recertify their income every year," potentially by leveraging IRS data-sharing. If this enhancement works as described, it could significantly ease the forward IDR application process. Such improvements could also prevent a future IDR application backlog of this magnitude from ever building up again by making it faster and easier to process IDR requests. Finally, borrowers should remember that the legal and oversight pressure remains. The AFT, the organization that took the Education Department to court, along with the SBPC, have indicated they will monitor the Department's progress closely and work on an information-sharing agreement to ensure the agency stays on track and continues to make progress against the application backlog. Further legal action could resume if the backlog isn't reduced as promised or if Department of Education student loan updates show insufficient improvement. Conversely, if the Department meets its commitments, borrowers could soon see their IDR plans approved and counts toward forgiveness updated, which would be welcome news to many.
Newsweek
22-04-2025
- Business
- Newsweek
What if You Can't Pay Your Student Loan? Trump Sets New Deadline
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. The Trump administration has announced it will resume collection efforts on defaulted federal student loans starting in early May. Why It Matters The resumption of payments will impact more than 5 million borrowers who are currently in default, the Education Department said, adding that another 4 million borrowers are late in making payments. What To Know Defaulted student loans have not been collected since March 2020 when the federal government activated a process known as administrative forbearance, which was put in place due to the economic turbulence caused by the coronavirus pandemic. The Biden administration extended the pause several times before repayments became due again in October 2024. Borrowers become delinquent from the first day a payment is late, and for most federal student loans, the outstanding balance goes into default after 270 days, or roughly nine months, of non-payment. The Education Department said it will begin informing borrowers who are in default via email over the next two weeks, urging them to make a payment or to enroll in a repayment plan. If action is not taken by May 5, defaulted borrowers will become subject to wage garnishment to collect their outstanding balances. Stock image/file photo: A mortarboard laid on U.S. dollar bills. Stock image/file photo: A mortarboard laid on U.S. dollar bills. GETTY What Happens If You Can't Pay Failing to make your student loan payment on time—or missing it altogether—can eventually lead to default. Once your loan goes into default, the full remaining balance of your loan, along with any accrued interest, becomes immediately due (known as "acceleration"), and the government has the authority to recover the debt by garnishing your wages, withholding tax refunds, and seizing other federal payments. Other consequences include: Losing access to deferment, forbearance, and other benefits—including the option to choose a repayment plan. Becoming ineligible for additional federal student aid, such as Federal Pell Grants and new student loans. The default is reported to credit bureaus, which can significantly lower your credit score and impact your ability to finance a car, home, or obtain credit cards. Rebuilding your credit can take several years, and you could face restrictions on buying or selling certain assets, like real estate. Your loan holder has the right to take legal action against you, and you could be responsible for additional costs, including court fees, collection expenses, and attorney fees related to the collection process. Repayment Plans The Department will also restart processing of applications for Income-Driven Repayment (IDR), which allows borrowers to tie loan payments to their incomes. Borrowers will have until May 5 to apply for a repayment plan if they are delinquent or in default. There are four main types of repayment plan: Income-Based Repayment (IBR)—sets monthly payments at 10 to 15 percent of a borrower's discretionary income, making it a suitable option for those with a high debt-to-income ratio. Borrowers can qualify for loan forgiveness after making 20 to 25 years of payments. Income-Contingent Repayment (ICR)—determines payments as either 20 percent of discretionary income or a fixed amount over 12 years, whichever is lower. Loan forgiveness is available after 25 years, and this is the only income-driven plan accessible to Parent PLUS Loan borrowers through consolidation. Pay As You Earn (PAYE)—caps payments at 10 percent of discretionary income and is available only to those who took out loans after October 1, 2007. Borrowers can receive loan forgiveness after 20 years of qualifying payments. Revised Pay As You Earn (REPAYE)—requires payments of 10 percent of discretionary income, regardless of income level. Loan forgiveness is granted after 20 years for undergraduate loans and 25 years for graduate loans. If you don't pick a repayment plan, your loan servicer will place you on the Standard Repayment Plan (a 10-year fixed payment repayment plan), which may result in a higher monthly payment. What People Are Saying U.S. Secretary of Education Linda McMahon said in a press release issued on April 21: "American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies. The Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear. Hundreds of billions have already been transferred to taxpayers. "Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment—both for the sake of their own financial health and our nation's economic outlook." Student Borrower Protection Center (SBPC) executive director Mike Pierce said in a statement: "For five million people in default, federal law gives borrowers a way out of default and the right to make loan payments they can afford. Since February, Donald Trump and Linda McMahon have blocked these borrowers' path out of default and are now feeding them into the maw of the government debt collection machine. This is cruel, unnecessary, and will further fan the flames of economic chaos for working families across this country." What Happens Next The Education Department's Office of Federal Student Aid will email all borrowers in default over the next two weeks. Later this summer, it will begin sending notices to initiate wage garnishment for those who remain in default.
Forbes
21-04-2025
- Business
- Forbes
One Mistake Could Erase Student Loan Forgiveness Progress Overnight
Thinking about student loan consolidation? For income-driven repayment and public service loan ... More forgiveness borrowers, the wrong move could disqualify you from student loan forgiveness. If you're racing toward student loan forgiveness, whether through Public Service Loan Forgiveness or an Income-Driven Repayment plan, one false move could wipe out years of progress: consolidating your federal loans at the wrong time. Loan consolidation can be a valuable tool in some cases, but in 2025, it comes with unique risks. Thanks to legal upheavals in the student loan system, federal borrowers who consolidate now may see their qualifying payment counts reset to zero, erasing the credit they've earned toward loan cancellation. In today's uncertain environment, marked by a court injunction against the SAVE repayment plan and other litigation that has paused key borrower protections, this is arguably the worst time to consolidate your loans. Under standard rules, consolidating federal loans means starting over on the path to student loan forgiveness. A Direct Consolidation Loan is treated as a brand-new loan, so any prior payments you made under PSLF or IDR no longer count toward the required threshold. The Department of Education has explicitly warned borrowers of this effect as the NSDFC notes: "Borrowers who consolidate will have their PSLF counts temporarily reset to zero." In the context of IDR plans, consolidation restarts the clock toward the 20 or 25 years of payments needed for forgiveness. Until recently, this hard reset was softened by a special one-time account adjustment that the Department of Education was implementing: borrowers who consolidated by specific deadlines could retain credit for past repayment time (including time on older FFEL loans or periods of long forbearance) toward IDR and PSLF. However, that one-time IDR count adjustment program officially ended in January 2025. If you missed the deadline, consolidating now will likely cost you all those prior months or years of progress. Consolidating mid-stream can wipe the slate clean for both IDR- and PSLF-driven student loan forgiveness: Public Service Loan Forgiveness: Only payments made on Direct Loans count toward PSLF. If you previously had FFEL or Perkins loans, you'd need to consolidate into a Direct Loan to qualify, but doing so ordinarily meant losing any PSLF credits earned. Today, unless you have consolidated by the waiver deadlines, any PSLF credits you built up on Direct Loans will be lost upon a new consolidation. The Department of Education's guidance notes that if you consolidate loans after September 1, 2024, past qualifying payments on those loans will not automatically transfer. Your count may revert to zero in many cases. This means a teacher or nurse who made 5 or 6 years of qualifying payments could see their 120-payment countdown start over from scratch by consolidating. Income-Driven Repayment Forgiveness: All IDR plans promise loan forgiveness after a set repayment period, but the clock counting those years can be reset if you combine loans. Years in repayment before consolidation wouldn't count toward the 20- or 25-year requirement unless applied via the [no longer available] 2025 may be especially problematic to consolidate for borrowers aiming for student loan forgiveness. Due to ongoing legal battles over the SAVE plan and other borrower protections, the student loan landscape is in flux. The SAVE plan was supposed to offer lower payments and faster forgiveness for millions. But in late 2024, a federal court blocked the SAVE plan, questioning the administration's authority to implement certain forgiveness provisions. In February 2025, the 8th Circuit Court of Appeals imposed an injunction halting SAVE and even pausing aspects of its predecessor, the REPAYE plan. This injunction has thrown many borrowers' repayment strategies into chaos. For months, the Education Department responded by freezing critical programs. In February 2025, the department abruptly closed its online applications for all IDR plans and Direct loan consolidations. Borrowers could not switch repayment plans or consolidate loans online for about a month. As Persis Yu, Deputy Executive Director of the Student Borrower Protection Center, said during an interview, "This has thrown the entire system into chaos... it is not entirely clear what it is going to mean for those borrowers". While the IDR application (and consolidation request) was eventually put back online by late March 2025 after advocacy and a lawsuit from the American Federation of Teachers, grave uncertainty remains. Notably, the forgiveness components of most IDR plans are still paused due to the court order. This means that even if you reach the finish line for forgiveness, the Department of Education might not process the discharge immediately (unless you switch to the older IBR plan created by Congress and not affected by the injunction). PSLF is also indirectly affected; borrowers who were enrolled in the SAVE plan found themselves in limbo for months. Around 8 million people on SAVE have effectively been in a forbearance status for eight months, during which their payments were paused. In such a turbulent policy environment, consolidating carries extra risk because it's unclear how or if past credits will be handled going forward. With the one-time adjustment program over and with the SAVE plan tied up in court, there is ambiguity about whether any retroactive credit will apply if you consolidate now. The Education Department has encouraged some borrowers close to forgiveness to consider switching plans (for example, moving to IBR) to get their forgiveness, but no such workaround exists for consolidation. If you consolidate in 2025, you are essentially betting that the legal situation will sort itself out favorably – a gamble that could cost you years of payments if it doesn't. Consolidating federal student loans is a double-edged sword. In a stable policy environment, it can be a smart move for those who need it; however, in 2025's unstable landscape, it can be a costly mistake for many borrowers, resetting the progress that would have led to student loan forgiveness. Until the legal dust settles and until we know the fate of the SAVE plan and related forgiveness provisions, it's wise to hold off on optional consolidations. Protect the progress you've made. In this season of uncertainty, the best course for many borrowers is to stay put, keep making qualifying payments, and remain vigilant for policy updates. Don't let a well-intentioned consolidation today erase your hard-earned path to a debt-free tomorrow.
