Latest news with #StudentLoanForgiveness
CNET
23-07-2025
- Business
- CNET
Yes, You Can Still Get Student Loan Forgiveness With IBR. What You Need to Know
Zooey Liao/CNET/Getty Images Student loan forgiveness options have dwindled considerably during President Donald Trump's second administration, but the Department of Education says forgiveness through Income-Based Repayment isn't going away. However, it is on pause. The Federal Student Aid website says IBR forgiveness is on hold while the Education Department retools its system to recalculate eligible payments. "IBR forgiveness will resume once those updates are completed," said an FAQ section updated July 9. The key question is how the Education Department counts payments made under the Saving on a Valuable Education repayment plan, which was struck down by the courts earlier this year. Borrowers on the IBR can have the payments they made on other income-driven repayment plans (including SAVE, PAYE and ICR) count toward their IBR forgiveness. But one of SAVE's features allowed borrowers to count months in certain types of forbearance when they didn't make payments, according to student loan expert Mark Kantrowitz. "The decision of the 8th Circuit Court of Appeals blocks these additional deferments and forbearances from counting toward forgiveness," he said in an email. "So the US Department of Education will need to make changes to the qualifying payment counts." IBR is an income-driven student loan repayment plan that adjusts monthly payments based on borrowers' income. Eligible student loan borrowers can receive forgiveness after 20 or 25 years' worth of payments, depending on when they took out their loan. It's currently the only repayment plan available that offers a path to forgiveness to existing borrowers. We'll explain what could happen with IBR, and what you should do if you're waiting for student loan forgiveness. Read more: SAVE Student Loan Borrowers: You Don't Have to Move to IBR by Aug. 1, but You May Want to: Here's How to Decide Is student loan forgiveness going away? Multiple paths to student loan forgiveness have disappeared in the past year. ICR, PAYE and SAVE plans are no longer eligible for forgiveness directly, following the court ruling in February that Congress exceeded its authority by approving them. Since IBR was created under a different rule, it wasn't affected by the court's ruling. Forgiveness through IBR should be safe for now. But it's understandable that borrowers -- deciphering confusing and misleading information as they wait for forgiveness -- may be skeptical of the Education Department's reassurances that IBR forgiveness is coming back. After February's court decision, the application for income-driven repayment plans was removed from the federal student loan site, causing concern among borrowers. But it was made available again a month later with revisions. This could, in theory, be a similar scenario, where the IBR forgiveness will resume at a later date. When will IBR forgiveness come back? Though the Education Department calls it "temporary," there's no indication how long the IBR pause will last. With a backlog of 1.5 million applications for repayment plans and huge swaths of the Department of Education staff wiped out, it's unclear how long it could take to resolve the payment recalculation. The Washington Post reported that several student loan servicers have said the Education Department hasn't asked them to process loan forgiveness for any borrowers since mid-January. "This not only affects the loan servicers, but also the US Department of Education, since final approval of loan forgiveness is handled in-house," Kantrowitz said. The Department of Education didn't immediately respond to a request for comment. Are there other options for forgiveness besides IBR? Besides IBR, existing borrowers will have another option next year under the new Republican-backed law passed earlier this month: the Repayment Assistance Plan. The new Repayment Assistance Plan could offer slightly lower monthly payments for some borrowers, but the plan calls for 30 years of qualifying payments before loans are forgiven, compared with the 20 to 25 years under the current IBR. So you'll end up paying more in interest over time. Anyone who takes out student loans after July 2026 will have just two repayment options: RAP and the standard repayment plan. Should I still apply for IBR if I'm a SAVE borrower? Millions of borrowers enrolled in SAVE will start accruing interest on their loans again starting Aug. 1. However, payments remain on hold while your loans are in a general forbearance, which could last until mid-2026. You aren't required to switch plans until then, although interest will pile up during that time. However, if you decide to switch, you can compare other income-driven repayment plan options using the Federal Student Aid loan simulator. You can apply to switch to an IDR on the FSA website to restart payments that count toward forgiveness. If you do apply for a new plan, expect the application to take several months to process due to the backlog, Kantrowitz said. The Department has been encouraging SAVE borrowers to switch to IBR, which could mean an even higher volume of applicants as the Aug. 1 deadline approaches. What should I do if I'm enrolled in an IBR? If you're enrolled in an IBR and near or past the payment threshold to be eligible for loan forgiveness, Kantrowitz advises you to continue making payments until you receive notification that your loans have been forgiven, which should happen automatically. "Any excess payments will be refunded," he said. "They could switch into a general forbearance, but there's a risk that they've counted their qualifying payments incorrectly. It is better to just continue making payments."
Yahoo
09-07-2025
- Business
- Yahoo
Student loan interest charges to kick back in for roughly 8 million borrowers
Roughly 8 million student loan borrowers will see their interest charges restart next month, the Department of Education announced Wednesday. Borrowers on the Biden-era Saving on a Valuable Education Plan -- about 7.7 million people -- will have interest charges return on Aug. 1 after a yearlong pause on payments. The return to interest charges was first reported by Bloomberg. MORE: 2 million student loan borrowers at risk of garnished wages in July "For years, the Biden Administration used so-called 'loan forgiveness' promises to win votes, but federal courts repeatedly ruled that those actions were unlawful," Secretary of Education Linda McMahon wrote in a statement released by the department Wednesday. "Since day one of the Trump Administration, we've focused on strengthening the student loan portfolio and simplifying repayment to better serve borrowers." The education department said it's complying with a federal court injunction that blocked implementation of the SAVE Plan earlier this year. But education advocates told ABC News that this move is expected to severely impact those millions of borrowers on SAVE who could potentially enter into more debt as interest accrues in the coming weeks. Student Borrower Protection Center Executive Director Mike Pierce called the move by the Trump administration a "betrayal" and blasted Secretary of Education Linda McMahon. "Instead of fixing the broken student loan system, Secretary McMahon is choosing to drown millions of people in unnecessary interest charges and blaming unrelated court cases for her own mismanagement," Pierce wrote in a statement to ABC News. SBPC, which focuses on eliminating the burden of debt for Americans, estimates borrowers will pay $3,500 in interest a year on average, which amounts to $27 billion in total, according to an analysis obtained by ABC News. "Every day we hear from borrowers waiting on hold with their servicer for hours, begging the government to let them out of this forbearance and help them get back on track -- instead McMahon is choosing to jack up the cost of their student debt without giving them a way out. These are teachers, nurses and retail workers who trusted the government's word, only to get sucker-punched by bills that will now cost them hundreds more every month. McMahon is turning a lifeline into a trap, and fueling one of the biggest wealth grabs from working families in modern history," Pierce said. The Trump administration said it will support borrowers in selecting a "new, legal repayment plan" that best fits their needs and will begin direct outreach to borrowers enrolled in the SAVE Plan, with "instructions on how to move to a legal repayment plan," the release said. For now, SAVE borrowers are still on a forbearance period, which postpones their payments. The SAVE Plan, dubbed the most affordable payment plan ever by the Biden administration, started after the Supreme Court struck down then-President Biden's Student Loan Forgiveness plan in 2023. SAVE is an Income Driven Repayment (IDR) program aimed at easing the return to repayment for millions of Americans that calculates payment size based on income and family size. MORE: Collections on defaulted student loans may affect millions of people's credit scores The interest restart comes as President Donald Trump recently signed into law his signature domestic policy agenda, 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. They will be replaced with two separate repayment plans: a standard repayment plan and a new income-based repayment plan called the Repayment Assistance Plan, according to the text of the megabill. The repayment plans are affected by legal challenges as well, according to the Department of Education release. The department is urging SAVE borrowers to consider enrolling in the income-based repayment plan authorized under the Higher Education Act until it can launch the Repayment Assistance Plan. MORE: Trump signs controversial spending bill during White House 4th of July celebrations In May, some 5 million Americans with defaulted student loan payments -- which means they hadn't paid their debts for around nine months or 270 days -- had their loans sent for collections for the first time since student loan payments were paused due to the onset of the COVID-19 pandemic. Earlier this year, McMahon said she has worked to simplify the "overly complex" repayment process and said taxpayers will no longer be responsible for the "irresponsible student loan policies" of the previous administration. "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," McMahon wrote in a department release this spring.
09-07-2025
- Business
Student loan interest charges to kick back in for roughly 8 million borrowers
Roughly 8 million student loan borrowers will see their interest charges restart next month, the Department of Education announced Wednesday. Borrowers on the Biden-era Saving on a Valuable Education Plan -- about 7.7 million people -- will have interest charges return on Aug. 1 after a yearlong pause on payments. The return to interest charges was first reported by Bloomberg. "For years, the Biden Administration used so-called 'loan forgiveness' promises to win votes, but federal courts repeatedly ruled that those actions were unlawful," Secretary of Education Linda McMahon wrote in a statement released by the department Wednesday. "Since day one of the Trump Administration, we've focused on strengthening the student loan portfolio and simplifying repayment to better serve borrowers." The education department said it's complying with a federal court injunction that blocked implementation of the SAVE Plan earlier this year. But education advocates told ABC News that this move is expected to severely impact those millions of borrowers on SAVE who could potentially enter into more debt as interest accrues in the coming weeks. Student Borrower Protection Center Executive Director Mike Pierce called the move by the Trump administration a "betrayal" and blasted Secretary of Education Linda McMahon. "Instead of fixing the broken student loan system, Secretary McMahon is choosing to drown millions of people in unnecessary interest charges and blaming unrelated court cases for her own mismanagement," Pierce wrote in a statement to ABC News. SBPC, which focuses on eliminating the burden of debt for Americans, estimates borrowers will pay $3,500 in interest a year on average, which amounts to $27 billion in total, according to an analysis obtained by ABC News. "Every day we hear from borrowers waiting on hold with their servicer for hours, begging the government to let them out of this forbearance and help them get back on track -- instead McMahon is choosing to jack up the cost of their student debt without giving them a way out. These are teachers, nurses and retail workers who trusted the government's word, only to get sucker-punched by bills that will now cost them hundreds more every month. McMahon is turning a lifeline into a trap, and fueling one of the biggest wealth grabs from working families in modern history," Pierce said. The Trump administration said it will support borrowers in selecting a "new, legal repayment plan" that best fits their needs and will begin direct outreach to borrowers enrolled in the SAVE Plan, with "instructions on how to move to a legal repayment plan," the release said. For now, SAVE borrowers are still on a forbearance period, which postpones their payments. The SAVE Plan, dubbed the most affordable payment plan ever by the Biden administration, started after the Supreme Court struck down then-President Biden's Student Loan Forgiveness plan in 2023. SAVE is an Income Driven Repayment (IDR) program aimed at easing the return to repayment for millions of Americans that calculates payment size based on income and family size. The interest restart comes as President Donald Trump recently signed into law his signature domestic policy agenda, 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. They will be replaced with two separate repayment plans: a standard repayment plan and a new income-based repayment plan called the Repayment Assistance Plan, according to the text of the megabill. The repayment plans are affected by legal challenges as well, according to the Department of Education release. The department is urging SAVE borrowers to consider enrolling in the income-based repayment plan authorized under the Higher Education Act until it can launch the Repayment Assistance Plan. In May, some 5 million Americans with defaulted student loan payments -- which means they hadn't paid their debts for around nine months or 270 days -- had their loans sent for collections for the first time since student loan payments were paused due to the onset of the COVID-19 pandemic. Earlier this year, McMahon said she has worked to simplify the "overly complex" repayment process and said taxpayers will no longer be responsible for the "irresponsible student loan policies" of the previous administration. "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," McMahon wrote in a department release this spring.
