Department Of Education Takes Down Key Student Loan Forgiveness And Repayment Applications

The Trump administration’s Department of Education abruptly removed two critical applications related to student loan forgiveness and repayment on Friday, throwing an already troubled federal student loan system into greater turmoil.

The department took down the online application portal for income-driven repayment, or IDR. IDR plans are repayment programs that allow borrowers to make payments based on a formula applied to their income and family size, with any remaining balance forgiven, typically after 20 or 25 years in repayment. The department also removed the online application to apply for a federal Direct consolidation loan. Both applications are critical for borrowers pursuing lower payments and loan forgiveness through IDR, as well as the related Public Service Loan Forgiveness (or PSLF) program.

The actions by the Department of Education appear to be in response to last week’s sweeping ruling from the 8th Circuit Court of Appeals, which extended and expanded a block on lower payments and student loan forgiveness under several IDR plans. Here’s the latest.

Department of Education Removes Online Applications Critical For Pursuing Student Loan Forgiveness And Lower Payments

On Friday, the Department of Education removed the online applications for IDR plans and Direct loan consolidation. The online IDR application allows borrowers to apply for several IDR plans including Income-Contingent Repayment, Income-Based Repayment, Pay As You Earn, and Saving on a Valuable Education. These plans are commonly referred to as ICR, IBR, PAYE, and SAVE, respectively. All of these plans provide for monthly payments tied to a borrower’s income, and historically the plans have allowed for eventual student loan forgiveness after many years in repayment.

The department provided no public announcement in conjunction with the removal of the applications. However, as of Friday, the application buttons on the department’s IDR and consolidation websites were grayed out, and the department added a message in a banner at the top of each web page.

“A federal court issued an injunction preventing the U.S. Department of Education from implementing the Saving on a Valuable Education (SAVE) Plan and other income-driven repayment (IDR) plans,” reads the notice. “As a result, the IDR and loan consolidation applications are currently unavailable.”

The online IDR application is critical for millions of borrowers. Recent graduates who are looking to enroll in an IDR plan must use the application to apply. Borrowers who are already enrolled in an IDR plan must recertify their income every year to update their monthly payment, and they would use the same application process. And those who need to change their repayment plan to a different IDR program would also use the application.

The online Direct consolidation application is also important for many student loan borrowers. Direct consolidation may be necessary for some borrowers who want to enroll in the PSLF program, as only Direct federal student loans qualify. Direct loan consolidation is also a mechanism for borrowers to get out of default and back into good standing.

Removal Follows Court Ruling Blocking Student Loan Forgiveness Under Several IDR Plans

The Department of Education’s action follows last week’s ruling by the 8th Circuit Court of Appeals, which extended and expanded a preliminary injunction impacting several IDR plans. The ruling was in response to ongoing litigation over the SAVE plan, President Joe Biden’s new IDR option that provided borrowers with lower payments, interest subsidies, and several student loan forgiveness tracks. The SAVE plan has been blocked since last summer following a legal challenge brought by a group of Republican-led states.

Last week’s decision extended and broadened the preliminary injunction blocking the SAVE plan, and also extended a halt to all student loan forgiveness under two other IDR plans – the ICR and PAYE plans, which were created using the same legal authority as SAVE. The court expanded the injunction to not only block lower payments and faster student loan forgiveness under the SAVE plan, as well as loan forgiveness under ICR and PAYE, but also now covers many other aspects of the SAVE plan regulations that were intended to benefit borrowers in all IDR plans. These include a preservation of a borrower’s previous qualifying IDR payments after consolidating, an option for borrowers to opt into automatic annual income recertification by authorizing the IRS to share income data with the Department of Education, allowing certain deferment and forbearance period to count toward IDR student loan forgiveness, and automatic enrollment in an IDR plan for borrowers who become delinquent on their student loans.

While the court stopped short of overturning the SAVE plan or other IDR options, the decision indicates that the SAVE plan is unlikely to survive. And student loan forgiveness under ICR and PAYE is also now in very serious jeopardy. The IBR plan, which was created separately by Congress, is not being challenged and is not directly subject to the injunction.

What The Removal Of The IDR Applications Means For Student Loan Forgiveness And Repayment

While the online IDR and Direct consolidation applications are down, borrowers still should be able to submit paper applications, which can be downloaded from the Department of Education’s forms library. Borrowers should be aware that when submitting an IDR application, you must include proof of income, such as your most recently filed federal tax return or a recent pay stub. Borrowers should submit the completed IDR application directly to your current student loan servicer.

It is unclear whether or not the removal of the online applications also signifies another pause on processing for IDR and Direct consolidation applications. The Department of Education first removed the online applications in August when the 8th Circuit issued its initial injunction blocking the SAVE plan, and also paused IDR processing at that time. The processing suspension lasted for several months, resulting in a massive backlog. IDR processing finally resumed in December, but the department warned borrowers to expect lengthy delays.

Another pause on IDR processing could have catastrophic consequences. Many borrowers enrolled in IDR plans now must certify their income in the coming weeks and months, in some cases for the first time in years. This would include borrowers enrolled in IBR, which technically should not be impacted by the injunction. Other borrowers who have been stuck in the SAVE plan forbearance, which has paused payments and interest as a result of the injunction but also stops the clock on student loan forgiveness progress for IDR and PSLF, may be trying to switch to a different IDR plan so that they can resume progressing toward loan forgiveness. And borrowers who are nearing their loan forgiveness threshold under the PAYE or ICR plans may also need to change to a different plan – likely IBR – to qualify for loan forgiveness.

As of Monday, the Department of Education’s published guidance still indicates that borrowers can apply for any of the available IDR plans, and that while borrowers should expect lengthy delays, processing is resuming. The guidance also makes clear that student loan forgiveness as a feature of the SAVE, ICR, and PAYE plans remains blocked. However, this guidance has not been updated since January, and it is unclear if the department will take any steps to further communicate the situation to borrowers.