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Associated Press
2 hours ago
- Business
- Associated Press
What's happening with forgiveness for student loans on income-based repayment plans?
NEW YORK (AP) — Amid a federal overhaul of student loan plans, many borrowers have been left wondering what it means for their hopes of loan forgiveness. In particular, those who are enrolled in a repayment plan known as income-based repayment, or IBR, have wondered if forgiveness will still be available to them. A recent update from the Education Department said forgiveness through the IBR plan is paused while systems are updated. 'IBR forgiveness will resume once those updates are completed,' the agency said. IBR is not affected by a federal court's injunction blocking former President Joe Biden's Saving on a Valuable Education, or SAVE, plan. The IBR plan was created by Congress separately from other existing repayment plans, including those known as PAYE and ICR. It's also exempt from some changes coming from President Donald Trump's tax and spending bill. Here's what to know. Which income-driven repayment plans are affected by the court's injunction? Following a court injunction last summer, loan forgiveness for the SAVE, Income-Contingent Repayment, or ICR, and Pay As You Earn, or PAYE, plans is currently paused because those plans were not created by Congress. The legal action called into question whether student loan forgiveness was authorized under the federal statute that governs those plans. The IBR plan was created under a different authority. IBR, created by Congress, reduces monthly payments for borrowers with lower incomes. It also invokes a statute that authorizes student loan forgiveness of the balance at the end of a 20- or 25-year repayment term. When will IBR forgiveness resume? The Education Department hasn't given a timeline for when its system update will be complete and forgiveness will resume. Should a borrower continue to make IBR payments in the interim? Borrowers enrolled in IBR who have reached the threshold for forgiveness but who 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. The plan offers forgiveness after 240 or 300 monthly payments, depending on when borrowers enrolled. Borrowers can also request forbearance from their loan servicer. In that case, interest would continue to accrue on any remaining balance. What changes are coming from Trump's 'big beautiful bill'? Trump's tax and spending law will eventually phase out the ICR, PAYE and SAVE plans, replacing them with the Repayment Assistance Plan. IBR plans will continue to exist and to provide forgiveness after 20 or 25 years. RAP, in contrast, will require 30 years of repayment before forgiveness is granted. ___ The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.
Axios
2 hours ago
- Business
- Axios
What to know about forgiveness pause in IBR student loan repayment plans
The Department of Education has temporarily suspended loan forgiveness under its popular Income-Based Repayment plan (IBR). Why it matters: IBR is the only current student loan forgiveness plan not subject to a legal challenge or court injunction, and Trump's signature " big, beautiful bill" significantly cut back on repayment options for borrowers. How it works: Income-Based Repayment is one of four federal plans that establish monthly payments based on earnings and family size over a 20 or 25 year period. Monthly payments are generally equal to 15% of a person's discretionary income (10% if you are a new borrower on or after July 1, 2014), divided by 12, per the DOE. After the 20 or 25 years, remaining loan balances are eligible for forgiveness. What's happening: The DOE said it was pausing forgiveness under the plan in an FAQ earlier this month. The reason for the pause, it says, has to do with required changes to forgiveness calculations caused by court actions impacting the related SAVE Plan. "Currently, IBR forgiveness is paused while our systems are updated," the department said. "IBR forgiveness will resume once those updates are completed." What they're saying: In a statement to Axios, Ellen Keast, Deputy Press Secretary repeated that the IBR pause was to "comply with ongoing court injunctions regarding the Biden Administration's illegal attempts at student loan forgiveness." "For any borrower that makes a payment after the date of borrower eligibility, the Department will refund overpayments when the discharges resume." Here's what to know: How many people will be impacted by the IBR suspension? About 2 million borrowers are enrolled in the plan. What other repayment plans are suspended? After much court back-and-forth, the SAVE, ICR, and PAYE plans are all in legal limbo. IBR was created separately by Congress, which is why it was exempt from the freeze. What does the One Big Beautiful Bill Act change? The bill cuts the number of repayment plan choices that federal student loan borrowers have down to two. One is a standard repayment plan, which gives borrowers a fixed monthly payment to repay their loans in 10–25 years. The current standard plan has a loan period of 10 years, regardless of loan size. The other is the Repayment Assistance Plan, which will involve monthly payments between 1% and 10% of a borrower's discretionary income (current offerings set payments at 10%, 15% or 20% of income). Borrowers on any current repayment plan other than the Saving on a Valuable Education (SAVE) plan will be able to keep their current payment structure, however. What happened to the SAVE plan? The BBB changes will affect those who take on loans from July 1, 2026, onward and current SAVE plan borrowers, as an appeals court blocked the Biden administration plan in February. Under the Republicans' plan, SAVE borrowers will have between July 2026 and July 2028 to choose a new plan. After July 1, 2028, those borrowers, if they haven't chosen one, will automatically be enrolled in the income-based repayment plan. There are about 8 million
The Hill
3 hours ago
- Business
- The Hill
Education Department pauses student loan forgiveness under IBR plan
The Education Department has paused student loan forgiveness under the Income-Based Repayment (IBR) plan without a clear timeline of when it might resume. The department argues any IBR forbearances were impacted by ongoing court action. 'The Department has temporarily paused discharges for IBR borrowers in order to comply with ongoing court injunctions regarding the Biden Administration's illegal attempts at student loan forgiveness. The Department's SAVE rule provided the authority to count forbearances in IBR toward loan forgiveness, but that rule has been enjoined,' said Ellen Keast, deputy press secretary for the department. 'Legal IBR discharges will resume as soon as the Department is able to establish the correct payment count. For any borrower that makes a payment after the date of borrower eligibility, the Department will refund overpayments when the discharges resume,' she added. The Department of Education is working through a court's injunction after the Biden administration's Saving on Valuable Education (SAVE) plan was ruled illegal. The agency argues that while the case did not impact forgiveness under IBR, what type of forbearances would count for loan discharges were. IBR allows individuals to make payments based on income and family size, receiving forgiveness after 20 to 25 years of consecutive payments. The department has encouraged individuals to join this plan as it shuts down the SAVE option. Those on SAVE will see interest accrual restart at the beginning of August and be kicked off the plan entirely in the following year.
Newsweek
4 hours ago
- Business
- Newsweek
Student Loans: Trump Admin Issues Update Impacting Millions of Borrowers
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 Department of Education under President Donald Trump has suspended student loan forgiveness for borrowers enrolled in the Income-Based Repayment (IBR) plan. The pause impacts around 2 million borrowers seeking relief under one of the last remaining federal income-driven repayment options not blocked by legal challenges or court orders. System updates tied to related legal actions against other forgiveness plans have stalled processing for those reaching the end of their IBR payment terms, leaving borrowers in limbo as they await clarity on when forgiveness may resume. "Currently, IBR forgiveness is paused while our systems are updated," the Department said in an updated guidance earlier this month. "IBR forgiveness will resume once those updates are completed." "Student loan borrowers who anticipated that a portion of their loans would be wiped out are in panic mode," Erica Sandberg, Consumer Finance Expert at told Newsweek in part. Why It Matters The shift affects a federal student loan system serving more than 40 million Americans and carrying over $1.6 trillion in debt. Recent restructuring efforts and legal battles, such as the suspension of the Biden-era SAVE (Saving on a Valuable Education) plan, have triggered widespread confusion, bottlenecks, and delays in debt relief. The IBR suspension compounds uncertainty for borrowers relying on income-driven repayment as an attainable path to loan forgiveness. Meanwhile, Congress has enacted reforms through the "One Big Beautiful Bill Act," which eliminates most current repayment plans and rewrites the rules for future loan forgiveness. U.S. President Donald Trump answers questions while departing the White House on July 11, 2025 in Washington, DC. U.S. President Donald Trump answers questions while departing the White House on July 11, 2025 in Washington, To Know The Department of Education attributed the suspension to technical system updates, indirectly referencing recent federal court injunctions against the SAVE plan, which was introduced under former President Joe Biden. Although legal action has directly blocked SAVE, the Department extended the processing freeze to the IBR plan. IBR participants who have reached the forgiveness threshold—20 or 25 years of qualifying payments—are unable to have their balances canceled for now. "Student loan borrowers who anticipated that a portion of their loans would be wiped out are in panic mode," Erica Sandberg, Consumer Finance Expert at told Newsweek. "Formal forgiveness under all repayment plans except the Income-Based Repayment (IBR) plan have been blocked, at least for now." Borrowers may continue making payments (which could later be refunded after loan discharge) or request a forbearance to suspend payments until the Department lifts the pause. However, interest will accrue during forbearance periods, adding to borrowers' eventual repayment totals. The Department has not offered a definitive timeline for when IBR forgiveness processing will resume, leaving roughly 2 million Americans with limited relief options. The Trump administration's restructuring of federal student loan programs is accompanied by legislative changes from the "Big, Beautiful Bill," which consolidates repayment options and implements strict new borrowing caps. The approved bill also sets a maximum 30-year term for forgiveness under the future Repayment Assistance Plan (RAP). Existing plans—including IBR, PAYE, and ICR—will be eliminated for new borrowers starting July 1, 2026, and current participants will be transitioned by July 2028. The Biden-era SAVE plan, which offered a 5 percent payment cap for undergraduate loans, remains blocked in court. The Department of Education's staff layoffs and system modernization, along with continued litigation, have created major backlogs in loan servicing and income-driven repayment applications. Millions of borrowers had their repayments or forgiveness decisions delayed for months as paperwork stalled and communication faltered, leaving borrowers uncertain about next steps or eligibility for new programs. "The Trump administration wants to roll back most of the forgiveness policies, and they'll do everything they can—within the legal structure—to make that happen," Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek. "This is just another example of how they'll either force repayment or make forgiveness harder to access." Newsweek reached out to the Department of Education for comment via email. What People Are Saying Erica Sandberg, consumer finance expert at told Newsweek: "Anyone expecting that a portion of their obligations would be forgiven must now take the wait and hope approach. Student loan debt cancellation would have been available to people who had a remaining balance at the end of their repayment term, either 20 or 25 years depending on the origination date of their their loans. It was the light at the end of the tunnel." Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: "This is going to be debilitating for many. Borrowers were expecting these loans to eventually be forgiven, and now they're facing even more uncertainty." Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "Unlike some of the forgiveness efforts introduced by the Biden administration, the income-based repayment plan was actually one congressionally approved that allows for forgiveness after a 20- or 25-year repayment term. There's a degree of shock in this, as many assumed this plan would be safe, even as other plans like SAVE were legally challenged. At this point, it's just suspended, but borrowers on the plan need to pay careful attention in the coming weeks to any developments." What Happens Next Borrowers affected by the IBR forgiveness pause are advised to monitor their loan servicer accounts, continue making payments if able, and consider seeking forbearance with careful consideration of interest accumulation. The Department of Education has not clarified when the system updates or forgiveness processing will resume. Meanwhile, the transition to the "Big, Beautiful Bill" repayment programs is expected over the next three years, and further legal developments could influence broader debt relief options for millions. "Removing loan forgiveness from the equation has devastated financially strapped borrowers," Sandberg said. "It's even worse for those who have already met the requirements for forgiveness. At this juncture, their plans to move forward with spending and saving must wait or be adjusted. As a protective measure, they'll have to build the payments back into their budget for the foreseeable future."
Newsweek
10 hours ago
- Business
- Newsweek
Nearly Half a Million Student Loan Repayment Plans at Risk: Report
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 Department of Education plans to deny 460,000 federal student loan borrowers from accessing lower repayment plans, according to a Politico report citing internal department documents. The affected students had selected the Saving on a Valuable Education (SAVE) Plan, a Biden-era policy that generally came with the lowest monthly payments and which the Education Department functionally abolished earlier this month. Newsweek has contacted the Department of Education for comment outside regular hours. Why It Matters The amendments to the SAVE Plan and the decision to deny lower-income students access is in line with the steps taken by President Donald Trump's administration to phase out educational policies and financial support systems enacted under his predecessor. While the Education Department has said it will support students transitioning to alternative plans, experts have said this could result in hundreds of dollars being tacked onto their monthly payments. What Was the SAVE Plan? The SAVE Plan was introduced in 2023, replacing the Revised Pay As You Earn (REPAYE) Program. Intended as a more generous income-driven option, undergraduates enrolled in the plan had payments capped at 5 percent of their discretionary income, rising to 10 percent for graduate borrowers, per Politico. According to the Department of Education, there are almost 7.7 million borrowers enrolled in SAVE. Amid a string of legal disputes and a court injunction blocking elements of SAVE in June 2024, enrollees have been in legal limbo and their loans placed in general forbearance with a zero percent interest rate since then. What To Know In early July, the Education Department announced that it would recommence interest accrual on loans in the "illegal" SAVE Plan. The change is set to take effect on August 1. An Education Department spokesperson told Politico that the reason for the 460,000 applications being denied was because loan servicers were now unable to process these "as SAVE is no longer an option, as it is illegal." In the place of SAVE, the department is rolling out two alternatives as part of the One Big Beautiful Bill Act, a budget package that Trump signed into law on July 4. These include a revised 10-year standard repayment plan and a new Repayment Assistance Plan. Education Secretary Linda McMahon testifies before the Senate Appropriations Committee's Labor, Health and Human Services, and Education Subcommittee in the Dirksen Senate Office Building on Capitol Hill in Washington, D.C., on June 3. Education Secretary Linda McMahon testifies before the Senate Appropriations Committee's Labor, Health and Human Services, and Education Subcommittee in the Dirksen Senate Office Building on Capitol Hill in Washington, D.C., on June its early July news release, the Education Department said it would "support borrowers in selecting a new, legal repayment plan that best fits their needs and helps them get on a sustainable financial path while protecting American taxpayers." The department has also begun outreach to the almost 8 million borrowers enrolled in SAVE, advising them on how to switch to a new plan. However, the new plans are "generally less generous than SAVE, requiring borrowers to pay more," according to Robert Kelchen, the head of the Department of Educational Leadership and Policy Studies at the University of Tennessee, Knoxville. According to the Student Borrower Protection Center, the decision to resume interest payments on SAVE debts could also force borrowers to pay more than $3,500 annually, or $300 per month, in additional fees. What People Are Saying Education Secretary Linda McMahon said in a news release on July 9: "Since day one of the Trump Administration, we've focused on strengthening the student loan portfolio and simplifying repayment to better serve borrowers. As part of this effort, the Department urges all borrowers in the SAVE Plan to quickly transition to a legally compliant repayment plan—such as the Income-Based Repayment Plan. Borrowers in SAVE cannot access important loan benefits and cannot make progress toward loan discharge programs authorized by Congress." Robert Kelchen, the head of the Department of Educational Leadership and Policy Studies at the University of Tennessee, Knoxville, told Newsweek: "The Department of Education fundamentally disagrees with the SAVE Plan and wants to quickly move to the new repayment options passed in the recent budget reconciliation bill. The fate of the 460,000 borrowers currently in SAVE will likely end up in court again, and the Trump administration will likely win based on other recent Supreme Court decisions in favor of [the Education Department]." What Happens Next The department has said interest will not be added retroactively to those previously enrolled on the SAVE Plan. It has urged borrowers to visit the government's Loan Simulator to assess monthly repayment options.
