Latest news with #RepaymentAssistancePlan
3 days ago
- Business
With student loan forgiveness under IBR plan paused, what it means for millions of borrowers
The Department of Education has paused the Income Based Repayment plan (IBR) in another significant move that alters the student loan repayment process for millions of Americans. The IBR plan cancels loan debt in full for borrowers who've made 300 monthly payments -- or about 25 years of payments. After that 25-year period, the plan cancels any outstanding balances and considers the borrowers' repayment obligation to be satisfied. Student loan advocates tell ABC News that borrowers are still being billed when their student loan should already be cancelled under the plan. "As of today, if you have been in debt for 25 years, you have a right under federal law to get your debt canceled, and the government is not honoring that law," Student Borrower Protection Center (SBPC) Executive Director Mike Pierce said. This plan was statutorily mandated under the Higher Education Act and encouraged by the Trump administration's Education Department while the agency launches its new Repayment Assistance Plan. The recent pause was not announced but is listed on a Frequently Asked Questions page of the Federal Student Aid site. It is now causing worry and confusion for borrowers who have been left in the dark, according to student loan experts. Pierce said the government suspended the forgiveness plan for reasons that the administration hasn't explained. "We don't know how many people are affected by it, we don't know how many people will be affected by it in the future, we don't know why it's happening," Pierce told ABC News. "We're worried that this is just the Trump administration deciding that its judgment is more important than the judgment of Congress, and it's going to do whatever the hell it wants," Pierce added. ABC News has reached out to the Department of Education for comment on the communication of the IBR plan pause. Under the recent pause, IBR accounts are being audited for the number of qualifying payments it has received. Abby Shafroth, managing director of advocacy at the National Consumer Law Center (NCLC), called the pause both surprising and concerning for borrowers as many have met the qualifying number of payments, but say that they're still getting billed. "It has sort of quietly come out that [IBR is] still not giving people cancellation," Shafroth told ABC News. Shafroth described the situation as a "mess." She noted the IBR plan is the one program that the current Education Department has encouraged borrowers to enroll in, has said will provide debt forgiveness and that Congress clearly established and mandated. "The Department of Education really has to own this and fix it," Shafroth said. "If they don't fix it, it's both going to break down trust and it's going to cost a lot of people more money. I don't know how many people, but it's going to cost people more money," she said. According to Shafroth, borrowers will keep getting billed on debts that they no longer owe and, as a result, they could end up having to pay large tax bills in their 2026 tax year. IBR is one of four Income Driven Repayment plans that takes a percentage of your income for monthly payments, including the Pay As You Earn (PAYE), Income Contingent Repayment and the Savings on a Valuable Education or "SAVE" plans. Borrowers on the Biden-era SAVE plan -- about 7.7 million people -- will have interest charges return on Aug. 1 at the same time the Education Department said it's complying with a federal court injunction that blocked implementation of the plan. The interest restart comes as President Donald Trump recently signed into law his signature domestic policy agenda, the One Big Beautiful Bill Act, which included a provision to terminate all current student loan repayment plans -- such as SAVE and other IDRs -- for loans disbursed on or after July 1, 2026. The plans will be replaced with two separate repayment plans: a standard repayment plan and the Repayment Assistance Plan, a new income-based repayment plan. However, these repayment plans are currently affected by legal challenges, according to a release from the department. The Education Department's recent student loan adjustments signal the Trump administration's shift away from former President Joe Biden's debt forgiveness plans. The department will create a Reimagining and Improving Student Education (RISE) Committee to address its upcoming changes. Secretary of Education Linda McMahon said she wants to simplify the overly complex system. Contrary to borrower fears, McMahon told ABC News her agency's reforms aren't meant to be "punitive" nor does she want to see borrowers defaulting on loans. "When you are in default on a loan, you can't buy a house, you can't buy a car, so call [the department]," McMahon said, adding, "Just make sure that you are on the right repayment plan." "Be proactive and get back into one of the payment plans," she said. Meanwhile, Shafroth said this pause in the IBR plan potentially makes borrowers more distrustful and, in turn, further divides the borrower and the government. "It really alienates borrowers, and they stop trusting the government and stop, in some cases, repaying, or, you know, being responsive on their loans," she said. SBPC's Pierce warned this is a legal matter that borrowers are entitled to having resolved.
Business Insider
5 days ago
- Business
- Business Insider
Trump paused student-loan forgiveness for nearly 2 million borrowers on income-based repayment plans
President Donald Trump's Department of Education quietly updated its guidance on student-loan forgiveness for borrowers on income-based repayment plans, which give enrolled borrowers monthly payments based on their income and family size with the promise of forgiveness after 20 or 25 years. According to Federal Student Aid data, just under 2 million borrowers were enrolled in IBR as of the second quarter of 2025. A notice posted on FSA's website said that ongoing litigation with former President Joe Biden's SAVE plan is preventing the administration from processing IBR forgiveness. "Currently, 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," the notice said. The SAVE plan, which allowed for cheaper monthly payments and a shorter timeline to debt relief, has been blocked since July 2024. Forgiveness through other repayment plans, including income-contingent repayment, was also blocked due to the court order. However, the court order did not include IBR, which falls under a different congressional statute. The department's deputy press secretary Ellen Keast told BI that the IBR relief pause is to "comply with ongoing court injunctions." "Legal IBR discharges will resume as soon as the Department is able to establish the correct payment count," Keast said. "For any borrower that makes a payment after they became eligible for forgiveness, the Department will refund overpayments when the discharges resume." Keast referred to a SAVE provision that allowed certain forbearance periods to count toward loan forgiveness. She said that while the court does not prevent relief through IBR, it impacts the types of forbearances that can be counted toward IBR relief, requiring the department to pause the discharges until it can adjust payment counts. The department did not comment on when the pause will be lifted. It comes at a precarious time for millions of borrowers — the department is restarting interest on SAVE borrowers' accounts beginning August 1, meaning their balances will once again start growing after a year on pause. To prevent balance growth, the department recommended that enrolled SAVE borrowers switch over to an IBR plan to begin making payments again. Trump's spending bill, which he signed into law on July 4, eliminated existing income-driven repayment plans and replaced them with two options: a standard repayment plan and a new Repayment Assistance Plan that allows for forgiveness after 30 years. Those plans aren't set to go into effect until July 2026. Since the bill also eliminates the SAVE plan, the department said borrowers should enroll in IBR in the meantime.
Business Insider
5 days ago
- Business
- Business Insider
Trump paused student-loan forgiveness for nearly 2 million borrowers on income-based repayment plans
Student-loan forgiveness just got more complicated. President Donald Trump's Department of Education quietly updated its guidance on student-loan forgiveness for borrowers on income-based repayment plans, which give enrolled borrowers monthly payments based on their income and family size with the promise of forgiveness after 20 or 25 years. According to Federal Student Aid data, just under 2 million borrowers were enrolled in IBR as of the second quarter of 2025. A notice posted on FSA's website said that ongoing litigation with former President Joe Biden's SAVE plan is preventing the administration from processing IBR forgiveness. "Currently, 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," the notice said. The SAVE plan, which allowed for cheaper monthly payments and a shorter timeline to debt relief, has been blocked since July 2024. Forgiveness through other repayment plans, including income-contingent repayment, was also blocked due to the court order. However, the court order did not include IBR, which falls under a different congressional statute. The department's deputy press secretary Ellen Keast told BI that the IBR relief pause is to "comply with ongoing court injunctions." "Legal IBR discharges will resume as soon as the Department is able to establish the correct payment count," Keast said. "For any borrower that makes a payment after they became eligible for forgiveness, the Department will refund overpayments when the discharges resume." Keast referred to a SAVE provision that allowed certain forbearance periods to count toward loan forgiveness. She said that while the court does not prevent relief through IBR, it impacts the types of forbearances that can be counted toward IBR relief, requiring the department to pause the discharges until it can adjust payment counts. The department did not comment on when the pause will be lifted. It comes at a precarious time for millions of borrowers — the department is restarting interest on SAVE borrowers' accounts beginning August 1, meaning their balances will once again start growing after a year on pause. To prevent balance growth, the department recommended that enrolled SAVE borrowers switch over to an IBR plan to begin making payments again. Trump's spending bill, which he signed into law on July 4, eliminated existing income-driven repayment plans and replaced them with two options: a standard repayment plan and a new Repayment Assistance Plan that allows for forgiveness after 30 years. Those plans aren't set to go into effect until July 2026. Since the bill also eliminates the SAVE plan, the department said borrowers should enroll in IBR in the meantime. Collections on defaulted student loans also restarted in May after a five-year pause, and the department said that wage garnishment will begin later this summer.
CNBC
6 days ago
- Business
- CNBC
Trump's 'big beautiful bill' created a new student loan repayment plan: Here's what borrowers need to know
When Congress passed the "big beautiful bill" earlier this month, and President Donald Trump signed it into law, it created a new student loan repayment plan. Next year, millions of borrowers will have access to that new option, called the "Repayment Assistance Plan," or RAP. Because the legislation also phases out a number of the U.S. Department of Education's existing repayment plans, RAP may be the only affordable choice for some. Here's what to know about RAP. RAP is what the Education Department calls an "income-driven repayment plan." Congress created the first IDR plans back in the 1990s to make student loan borrowers' bills more affordable. Historically, the plans cap people's monthly payments at a share of their discretionary income and cancel any remaining debt after a certain period, typically 20 years or 25 years. RAP is different in a few significant ways. For one, it doesn't shield a portion of a borrower's income like other IDR plans do, but rather calculates their bill based on so-called adjusted gross income. (AGI is your total earnings before taxes, minus certain deductions.) More from Personal Finance:Trump's 'big beautiful bill' includes these key tax changes for 2025Student loan bills to double for some borrowers as Biden-era relief expiresWhat a Trump, Powell faceoff means for your money The share of a borrower's income that the plan requires also rises the more they earn. Under RAP, monthly payments will typically range from 1% to 10% of your earnings; the more you make, the bigger your required payment. There will be a minimum monthly payment of $10 for all borrowers. (Under other IDR plans, certain low-income borrowers were entitled to a $0 monthly payment.) RAP leads to student loan forgiveness after 30 years, compared with the typical 20-year or 25-year timeline on other IDR plans. RAP should be available by July 1, 2026, according to the Education Dept. Borrowers with existing loans will maintain access to some existing repayment plans, including Income-Based Repayment, or IBR. However, after July 1, 2026, new borrowers will have just two options. They can pick between RAP or a standard repayment plan, under which their debt is divided into fixed payments over a period ranging from 10 years to 25 years, depending on their balance. An important point to keep in mind: Even borrowers with old loans who take out a new one after July 1, 2026 will lose the existing options for that loan, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers. This will affect students partway through their degree, for example. "If you borrow again, you will be in the world of two choices," Buchanan said. RAP comes with a few perks. Federal student loan borrowers get $50 off their monthly bill per qualifying dependent, for example. Those who are keeping up with their bills but aren't making progress paying down their principal will also get a small subsidy by the Education Dept. Plus, payments made under RAP will give borrowers credit on the decade-long timeline to debt relief under the Public Service Loan Forgiveness program.
Business Insider
18-07-2025
- Business
- Business Insider
Trump is beginning to implement his sweeping student-loan repayment changes
Student-loan borrowers will soon start seeing changes to the way they borrow and pay off their loans. After President Donald Trump signed into law his tax and spending bill, which included major changes to student-loan repayment, the Department of Education announced it was beginning to implement some of the new provisions. The department wrote in a July 18 letter that "many" of the changes in the spending law will be implemented on July 1, 2026, including the creation of two new income-driven repayment plans. However, the department said it is working with student-loan servicers to roll out a series of changes before then: No longer requiring borrowers to have partial financial hardship to qualify for an income-based repayment plan; Expanding options for borrowers who took out parent PLUS loans to enroll in an income-based repayment plan; Reducing the amount a student can borrow if they're enrolled in a program that is not full-time; And delaying the implementation of former President Joe Biden's borrower defense to repayment and closed school discharge regulations. If a borrower believes they were defrauded by the school they attended, they can apply for borrower defense, and if their claims are approved, their loans will be forgiven. Biden's administration attempted to make the process easier for borrowers to navigate, but it was blocked in court and never implemented. Acting Undersecretary James Bergeron said in a Friday statement that Trump's spending bill "delivers for student borrowers in a big way — simplifying the student loan repayment system, funding the $10.5 billion shortfall in Pell Grant funding left by the previous administration, supporting short-term career focused programs that train workers for in-demand jobs, and holding colleges accountable by eliminating student loan eligibility for programs that leave students worse off than if they had never enrolled." "Today's announcement is the first step in the implementation process, and we look forward to building the President's vision for education and training beyond high school," Bergeron said. The department's letter also said that it is amending the Public Service Loan Forgiveness program, which forgives student debt for government and nonprofit workers after 10 years of qualifying payments, to allow payments made under a new income-driven repayment plan to count toward forgiveness. Trump's spending bill eliminates existing income-driven repayment plans and replaces them with two options: a standard repayment plan and a new Repayment Assistance Plan, which sets borrowers' monthly payments at 1% to 10% of their income, with any remaining balance forgiven after 30 years. The options are less generous than the SAVE plan, which the bill eliminates. SAVE would have allowed for cheaper monthly payments with a shorter timeline to debt relief. The department announced on July 9 that interest charges will restart on the balances of the 8 million borrowers enrolled in the SAVE plan. The department said more information on changes to repayment from the spending bill will be announced in the coming weeks and months. They come as the administration is working to dismantle the Department of Education; the Supreme Court ruled on July 14 that Trump can proceed with firing department staff.
