Student loan borrowers won’t be able to apply for income-driven repayment plans for at least three months, The Washington Post reported.
The Post obtained a memo sent last week from the Department of Education to student loan servicers directing them to stop processing all income-driven repayment and consolidation applications until at least May. The memo offers more clarity on how the department plans to proceed after a federal appeals court blocked the department from implementing a new income-driven repayment option for borrowers put in place by the Biden administration. That injunction also implicated parts of other income-driven repayment plans.
Up until this point, all that student aid experts knew was that the department had disabled new online applications. Now, they know that all existing applications have also been included in the freeze.
The application freeze is a problem for some borrowers who rely on income-driven repayment plans for more affordable payments and to avoid default. Under the plans, borrowers’ monthly payments are based on their disposable income and other factors, and after 20 to 25 years of payment, the remaining balance would be forgiven. But now, millions of borrowers no longer have access to IDR and are left with only the most expensive loan repayment options.
Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for loan servicers, told the Post that “there is a lot to clean up.”
“We will be working for [the Office of Federal Student Aid] to implement that transition once courts clear things up and bring some finality so borrowers can have certainty and confidence in their options now and in the future,” Buchanan said.
The Education Department has said the pause is necessary under the U.S. Court of Appeals for the Eighth Circuit ruling, but paper applications for loan consolidation will be allowed.
“A federal Circuit Court of Appeals issued an injunction preventing the U.S. Department of Education from implementing the SAVE Plan and parts of other income-driven repayment (IDR) plans,” a department spokesperson said. So “The department is reviewing repayment applications to conform with the Eighth Circuit’s ruling.”
But legal experts on federal loans have told Inside Higher Ed taking down the applications entirely is not necessary. As the department noted in its statement, the injunction only declares “parts” of the IDR plans—such as the end-of-program loan forgiveness—illegal. It does not ban the use of lessened monthly payments.
