Thanks to a lawsuit filed against the U.S. Department of Education, income-driven student loan repayment plan applications have re-opened. Borrowers who have been stuck in the SAVE plan forbearance can now apply to enroll in one of the three other income driven repayment plans: the Income Contingent Repayment plan (ICR), the Income Based Repayment plan (IBR), or the Pay As You Earn plan (PAYE). This is critical news for anyone who want to pursue Public Service Loan Forgiveness. Those who’ve been in the SAVE plan haven’t been able to make progress toward PSLF since the forbearance began last summer.
“Unfortunately, though we encourage members who want to get back on track for PSLF to file an application, we remind you that your payments may increase when you switch from SAVE to one of the other plans,” says Martin Lynch,
Compliance Manager and Director of Education for Cambridge Credit Counseling, a CEA member benefits partner. “It’s also unclear how long it will take to process your income-driven repayment plan application because there are roughly 8 million borrowers on the SAVE plan who will be making that same transition and it looks like no one is prepared to process applications.”
A hearing has been scheduled for mid-April at which point the court may force the U.S. Department of Education to process the applications. Preventing loan holders from applying for the Income-Based Repayment plan is illegal because, unlike the other plans, IBR was created by Congress and must be made available.
“We’ve reassured members repeatedly that Public Service Loan Forgiveness will remain available because it was also created by Congress, but there are still some roadblocks in the short term,” Lynch says. “For example, a PSLF application will not be processed if the borrower is enrolled in the SAVE, PAYE, or ICR repayment plans, but it will be processed if the borrower was paying through the IBR plan. That obstacle appears to only be temporary, as the Department of Education also indicated that the PAYE and ICR plans will be extended soon.”
If you’re a PSLF candidate who would have reached your 120th payment but have been caught up in the SAVE forbearance, the “Buyback” option is still available for you. Please see studentaid.gov for details.
“Consolidations are available again, but we wouldn’t recommend that step for the majority of borrowers at the moment. There are two exceptions, however: recent college graduates can consolidate, and any parents looking to complete the double-loophole consolidation process should get to that without any additional delay. For those using the loophole strategy, all of your consolidations must be completed (not just the applications, but the actual consolidations) before July 1, 2025,” Lynch says.
New recertification dates will be based on your IDR status according to Cambridge Credit.
- If you recertified your income before February 20, 2025, and your loan servicer processed it, you won’t be able to change the payment. It’s locked in for now.
- If you recertified your income before February 20, 2025, but your loan servicer didn’t process it, your recertification date will be extended by one year. Because servicers had halted recertifications quite a while ago, most borrowers may fall into this category.
- If you had been asked to recertify but failed to do so and have since been placed on the Standard repayment plan (resulting in a substantial increase in your payment), you must submit a recertification request to reduce that payment. Do so immediately by following this link: Apply for or Manage Your Income-Driven Repayment Plan.
- If you weren’t scheduled to recertify until after Feb. 20, 2025, then your recertification date has been extended by at least one year.
Given all of the interruptions and delays in repayment, as well as what will likely be a rush by borrowers who had been on SAVE to switch into one of the other IDRs, it’s also just as likely that there will be additional changes to this recertification guidance, so stay tuned to the CEA Daily for additional updates.
