First Big Update On Student Loan IDR And PSLF Processing Shows Slow Progress

The Trump administration released its first official update on student loan income-driven repayment plan application processing on Thursday, outlining how many IDR and PSLF Buyback applications have been processed and how many more are still in the queue. The numbers indicate that the Department of Education has processed only a small fraction of outstanding applications, and a huge backlog remains. The new information comes five days after the department expected IDR processing to fully resume for federal student loan borrowers after an extended pause.

The update was filed in an ongoing legal battle over the department’s decision to halt all IDR application processing in the wake of a court ruling in a separate lawsuit over the future of the SAVE plan, a Biden-era IDR program that was challenged in court by a group of Republican-led states. The Trump administration resumed processing IDR applications in recent weeks. But now, loan servicers have a massive backlog to work through, and hundreds of thousands of student loan borrowers have been stuck in limbo in the meantime.

Here are the latest updates on IDR application processing, and what student loan borrowers can expect in the coming weeks and months.

IDR Application Processing Pause Threw Student Loan System Into Disarray

The turmoil surrounding IDR plans began last year, when a group of Republican state attorneys general, led by Missouri, filed legal challenges against the Biden administration over the SAVE plan. SAVE is the newest of four income-driven repayment plans that allow borrowers to repay their federal student loans based on a formula applied to their income and family size. Other IDR plans include Income-Contingent Repayment, Income-Based Repayment, and Pay As you Earn (known by the acronyms ICR, IBR, and PAYE, respectively).

Historically, all IDR plans can lead to eventual student loan forgiveness if the borrower is unable to repay their loans in full, typically after 20 or 25 years in repayment. IDR plans are also usually required for borrowers pursuing Public Service Loan Forgiveness. PSLF can lead to loan forgiveness after a borrower makes 120 qualifying monthly payments (the equivalent of 10 years if made consecutively) while working as a full-time employee for eligible nonprofit or government organizations.

But last summer, in response to the GOP legal challenge, a federal appeals court issued an injunction blocking the SAVE plan. As a result, more than eight million borrowers who had enrolled in the plan or were converted automatically from its predecessor, the REPAYE plan, were thrown into an involuntary forbearance. While this paused payments and interest, the forbearance also halted progress toward student loan forgiveness for both IDR and PSLF.

Then in February, the same federal appeals court issued another ruling that broadened that existing injunction to encompass not just the SAVE repayment formula and student loan forgiveness benefits, but the entire regulation governing the SAVE plan. The court also questioned the legality of student loan forgiveness under the ICR and PAYE plans, although it stopped short of formally striking these plans down. In response, the Department of Education removed the IDR application and halted all application processing not just for SAVE, but for all IDR plans including ICR, IBR, and PAYE, as well.

Group Filed Legal Challenge, Arguing Student Loan Processing Pause Unlawfully Blocked IDR And PSLF

In March, the American Federation of Teachers sued the Trump administration over the systemwide IDR processing pause, arguing that it was unlawful and causing massive harm to student loan borrowers by preventing them from enrolling in affordable payment plans that the Department of Education was required to offer under federal law. The pause, the AFT argued, also prevented borrowers stuck in the SAVE plan forbearance from switching to another IDR plan so they could continue working toward student loan forgiveness under IDR plans and PSLF.

“The Department has chosen to shut down access to all income-driven repayment plans,” said the AFT in its Complaint. “The result: borrowers are unable to access affordable monthly payment plans, some borrowers are being thrust into default on their debt, and some public service workers are being denied their statutory right to lower their monthly payment and earn credit towards Public Service Loan Forgiveness (PSLF).”

In response, the Department of Education argued that officials had no choice but to shut down the entire IDR system in response to the February court ruling, because the court’s injunction blocking the SAVE plan regulations also impacted the payment calculations under ICR, IBR, and PAYE. The enjoined regulations defined how certain factors like family size for all IDR plans would be calculated, officials argued.

“Enjoined provisions of the 2023 IDR Rule, including those related to the REPAYE and SAVE plans, were inextricably intertwined with any application submitted only for the IBR, PAYE, and original ICR plans,” said the department in a court filing last month. “To prepare to comply with the broadened preliminary injunction that the Eighth Circuit instructed should be issued on remand, the Department determined it was necessary to revise both the online and paper versions of the applications used for all IDR plans.”

Ultimately, the Department of Education informed the court in the AFT challenge that IDR application processing would resume in May. The department and the AFT then reached an agreement whereby the department would file periodic status reports providing specific details on processing progress as student loan servicers work through a backlog of nearly two million IDR applications.

First Status Report On Student Loan IDR And PSLF Buyback Application Processing Shows Slow Progress

On Thursday, the Department of Education released its first status report on IDR application processing. And the numbers may not be particularly encouraging for student loan borrowers.

During the month of April, when IDR processing first resumed, the department and its loan servicers processed 79,349 applications. At least 1,985,726 IDR applications remain in the queue. This indicates that a very significant application backlog remains, and less than 4% of outstanding IDR applications have been processed.

The department also released information on processing of PSLF Buyback requests. PSLF Buyback is a program allowing federal student loan borrowers to “buy back” periods of deferment and forbearance that don’t normally qualify toward student loan forgiveness. Like IDR programs, PSLF Buyback applications have largely been stalled since last summer. But until now, there was no public information available on the scope of the PSLF Buyback application backlog.

In the status report, the department indicated that 1,472 PSLF Buyback applications have been processed. At least 49,318 applications remain in the queue. As with IDR, this is a substantial backlog. Less than 3% of PSLF Buyback applications have been processed. The department confirmed in its report that the SAVE plan forbearance period is eligible for PSLF Buyback.

This is just the first of what will be several status reports released by the Department of Education on IDR and PSLF Buyback application processing. The next report will be due in 30 days. Federal student loan borrowers who are still stuck in the IDR or PSLF Buyback application backlog will hopefully get some additional updates then – maybe with some better news.