The Trump Administration and the Department of Education (DOE)made significant announcements regarding student loan repayment processing.  Since late June 2024, income-driven repayment (IDR) systems have been limited due to the SAVE lawsuits.  IDR rules are still not fully defined, but this new information helps.  Some borrowers can make better decisions as processing is about to begin.

The DOE announced that IDR form submissions will begin processing in early May.  The loan servicers have not been processing IDR submissions yet, but borrowers were able to enroll in these plans.  Enrollment periods were open and closed over the past year, but now borrowers can access the IDR methods, excluding the SAVE plan option.

As a result, a significant IDR backlog exists.  With this new information, many borrowers should take some immediate steps to restart their repayment based on the prior history of government changes.  In most previous cases, the government provided a grandfather period that allowed borrowers to use current rules and keep those rules as long as the borrower did not make changes.

There are 8 million borrowers who were moved to or enrolled in SAVE.  Depending on each borrower’s situation, the sooner you get in line, the better off you will be.

List of Key Developments

• Applications for the ICR, IBR, and PAYE plans are being processed, while the SAVE plan remains suspended following a court injunction.
• The DOE has resumed processing income-driven repayment (IDR) plan applications, but only for specific borrowers at this time.
  • Processing priorities will be based on the borrower’s tax filing method
• Complete processing for eligible IDR plans is expected to resume by May 10, 2025, but there is a significant backlog
• Borrowers previously enrolled in SAVE have been placed in administrative forbearance until July 31, 2025, at this time.
• If borrowers change their IDR plan, they must update their income, which may increase their loan repayment.  Most current IDR payments are based on 2019 income and tax filing status.
  • IDR options use the student loan origination date and loan type
• Borrowers pursuing PSLF can start earning credits, and possibly some during the processing time
• Possible loss of tax filing advantage for married and separate IDR users may impact future repayment methods

Current IDR Processing Status

Before these announcements, the IDR process was a mess, depending on where you were.  Due to the SAVE lawsuit and the different rulings, the DOE had to make various decisions to stay compliant.  System constraints impacted their choices.

The biggest issue was the transparency of the process.  The DOE recommended enrolling in other IDR methods when the system was available, but the applications were not being processed.  The lack of processing started with the SAVE lawsuit.  Until recently, the application process was also not available.

According to the announcement from Acting Under Secretary Bergeron, some IDR processing has already begun.  This is great news for single taxpayers and some married couples.  Due to a possible policy change, they are delaying borrowers who file marriages with taxable income.  This will include both married couples who file jointly and separately.

IDR Upcoming Policy Change & Rule-Making Process

They will delay the IDR processing for married couples, specifically those who filed married and separately.  Under the current rules, when only one spouse has federal loans and uses an IDR method, a lower payment can be generated if they file married and separately.  This tax strategy was initially discussed as being eliminated.  DOE Secretary Linda McMahon later walked back that statement and provided additional clarity.  It would not surprise me if it is considered under a new IDR method in the future.

Due to various SAVE lawsuits, PAYE and ICR are under different scrutiny.  Those enrolling in PAYE and ICR are at risk since they are written under different rules that are in question.  The IBR method is under a congressionally approved statute, making it harder to change.  If SAVE borrowers are converted back to REPAYE, that method disallows the tax-filing advantage for married and separate couples.

The administration has also announced the initial phase of the Executive rule-making process.  This process allows for modification to existing laws through an interview and open comment period.  It was used to pass the SAVE payment method.

The Rule-Making procedure will be challenging to complete, but not impossible.  It requires interviews, law writing, a comment period, and implementation.  Some parts must be completed by November for the implementation in July of the following year.

Full impact may not be available until July 2026, depending on the lawsuits and the rule-making process.

Next Steps for Borrowers Enrolled in SAVE

Borrowers currently in SAVE must apply for a different IDR plan if they wish to return to repayment and start earning PSLF Credits.  Your debt structure will determine which methods will be available to each borrower.  The loan origination date and type of loan will determine which options will be available.

The best option is to apply using the StudentAid.gov website.  To complete the application process, you will prove your current income in a PDF format.  You will need to be able to upload that information.  The most common will be a recent paystub, 1040 tax form, or current W2.

Since IDR income recertification has not been done since COVID-19 started, many borrowers may see a significant increase in their monthly payments.  If you have a change in marital status and the proposed tax filing proposal is enforced, this payment change could be enormous.

Due to the processing backlog, plan now and discover your options.  Doing nothing is not a good plan.  The SAVE method will almost certainly be eliminated.  Knowing your options before the 8 million enrolled SAVE borrowers run for the door would be better.  PayForEd and the list of trained advisors have the information you need to navigate your options.

Implications for Forgiveness Programs Related to SAVE Borrowers

Under the current SAVE Administrative Forbearance, PSLF credits are not being earned, which is a problem for many borrowers.  At the same time, payments are not required, and interest is not charged.  This strategy may suit some borrowers since it will keep their payments lower.  If you do not change plans, the income recertification process will not start until 2026.

For those pursuing PSLF, there could be some advantages to changing IDR plans now.

• Time spent in processing forbearance (up to 60 days) will count toward Public Service Loan Forgiveness (PSLF) with no payments.
  • Borrowers whose applications aren’t processed within 60 days will be moved to general forbearance, which doesn’t count toward PSLF or IDR forgiveness.

• PSLF Buyback program may allow some borrowers to count non-qualifying forbearance periods, but only under specific conditions
• Once the IDR change is completed, PSLF credits can be earned, assuming the other rules are met.

There is currently a PSLF Buyback program, where borrowers who have nearly completed the 120 required payments can buy back PSLF credit months.  Missing payment months are purchased using the missing months’ IRS taxable data reported and the IDR methods available.  This option could apply to the SAVE Forbearance months if you have qualifying employment.  Employment verification is submitted through the PSLF Help Tool.

You can now view this detail on the StudentAid.gov site, a great new addition.

The outcome of the end-of-term or IDR forgiveness offered to IDR borrowers after 20 or 25 years is unclear at this time.

Student Loan Repayment Processing Summary Related to IDR and SAVE

We have some good news from the DOE that we can act on regarding the future of IDR and forgiveness.  Between the COVID-19 and the SAVE lawsuits, it has been a trying time for all involved.  The student loan repayment processing delays are coming to an end.  The problem that many are facing is the reality of the required payment after 5 years of non-payment.

With the proper planning and advice, you can minimize your payments.  In many cases, IDR borrowers depend on the loan servicers to give them the appropriate guidance.  Due to IRS integration and new repayment complexities, loan servicers are limited to the advice they can provide.  They cannot provide tax or financial planning advice or help you reduce your payments properly.  Borrowers need to be careful; there will be plenty of scam offers, so be careful.