Student loan borrowers can no longer apply for income-driven repayment plans after the Trump administration paused applications—the Education Department’s first substantial action on student loans under the new president. But it’s unclear whether the pause is a temporary response to court orders or part of a broader Republican plan to remake the student loan system, financial aid experts say.

The application freeze came just days after an appeals court once again enjoined the Education Department from carrying out a new income-driven repayment option for borrowers. That plan, commonly known as Saving on a Valuable Education, or SAVE, was put in place by the Biden administration and was intended to give borrowers lower monthly payments and quicker pathways to debt relief. 

More than eight million borrowers signed up for SAVE when the Biden administration rolled the plan out in summer 2023, but its run was short-lived. The Eighth Circuit Court of Appeals first blocked some provisions of the plan with an emergency injunction in August 2024. Then, just last week, the same judges put out an expanded order that halted the entire SAVE rule and declared that the Education Department can’t forgive any loans via income-driven repayment plans.

Now, the lawsuit has been sent back to the district court for review, and millions of borrowers enrolled in income-driven repayment and banking on forgiveness are once again in the lurch.

The Department of Education has yet to comment on the ruling aside from a small banner on the application website that acknowledges the injunction and says, “As a result, the IDR and loan consolidation applications are currently unavailable.”

It remains unclear how long that pause will last and whether the department is just implementing the freeze on new digital applications or if it has also stopped accepting paper copies and processing existing requests.

Some higher ed policy experts, like Preston Cooper, a senior fellow at the American Enterprise Institute, speculate that the department’s move was truly driven by the injunction and is simply a move made out of caution.

“I would imagine that while the Office of Federal Student Aid is working through the legal ramifications of that ruling,” he said. “They’re taking the application down temporarily, just while they work out exactly what the legal requirements [are] on the Department of Education.”

But others, including the Student Borrower Protection Center, don’t buy that shutting down IDR was what the court ordered.

“The administration’s cruel choice to cut off access to affordable repayment options passed by Congress and enshrined in millions of borrowers’ loan contracts comes at the same time as they are wreaking havoc on communities and families across our nation,” Persis Yu, SBPC deputy executive director, said in a statement Monday. “None of this is by accident.”

Loan experts do agree, however, that the pause is concerning and could have massive implications if it becomes permanent.

Borrowers, they say, would likely see higher monthly payments. For instance, about four million borrowers are eligible for zero-dollar payments under the enjoined SAVE plan. The department would have to make significant operational changes to transfer loans from one repayment plan to another.

“A lot depends on how long the application is down for,” said Karen McCarthy, vice president of public policy at the National Association of Student Financial Aid Administrators. “But the whole purpose of the income-driven repayment plans is to help struggling borrowers stay in a satisfactory repayment status … so to not have any of those income-driven repayment plans available would definitely remove that large safety net.”

‘Going to See Chaos’

Congress first passed a law allowing the education secretary to base repayment plans on a borrower’s income in 1993, and the first plan launched in 1994. Under the plans, borrowers make payments for 20 to 25 years and then see their remaining balances wiped out. When Joe Biden took office in 2021, only 50 borrowers had completed the program and received forgiveness on any remaining balance. That number jumped to 1.45 million by the time he left office in January, according to a Biden news release.

But the Eighth Circuit court ruled last week that Congress’s underlying statute doesn’t explicitly authorize loan forgiveness.

“The power Congress gave the secretary … to create repayment plans means the secretary must design [income-contingent repayment] plans leading to actual repayment of the loans,” the panel wrote in a 25-page opinion. “The secretary has gone well beyond this authority by designing a plan where loans are largely forgiven rather than repaid.”

Adam Minsky, a lawyer who specializes in student loans, says, however, that although the court clearly bans loan forgiveness at the end of an IDR plan, there’s “absolutely nothing” in the appellate court’s order to suggest the department is required to stop accepting applicants and allowing payments to be based on income.

He noted that the IDR application website is the platform where borrowers access a whole swath of repayment plans beyond just SAVE and where they can apply to consolidate multiple loans. So by freezing access to the application portal, the department is overreaching the requirements of the injunction.

“In fact, the Eighth Circuit reiterated that one of the four income-driven plans—Income-Based Repayment, or IBR—is not covered by the injunction,” Minsky said. “And while the court has blocked loan forgiveness at the end of the term for ICR and the Pay As You Earn plan … borrowers can still enroll in those plans.”

There are even borrowers who are trying to switch to an IBR plan because SAVE is stuck in litigation and almost certainly will not come out alive, he said. Comparatively, IBR should be a safe and steady repayment plan because it is written into statute, but as long as the application portal remains closed, millions of borrowers are stuck.

“Just repealing SAVE alone would have huge implications because borrowers would then see a spike in their payments,” Minsky said. “But if you take away the ability to even enroll in any of these programs, including ones that are not blocked by the court, I think we’re going to see chaos.”

The legal fight is still ongoing and likely won’t be resolved for months. Cooper from AEI said the pause and/or a final ruling may prompt Congress to step in and more clearly define what the actual terms of income-driven repayment plans are.

But that would require bipartisan agreement and enough interest to push it to the top of an ever-growing priority list during an incredibly busy session. So until then, NASFAA is just hoping the Education Department will provide more clarity on whether the pause is permanent, and if it is, what other avenues are available for borrowers.

“That’s always a big area of concern for us … just the general confusion and how to mitigate that to the maximum extent practicable,” McCarthy said. “And if we’re having a hard time keeping track of what’s happening, I imagine that borrowers are as well.”