The Trump administration’s Department of Education has unexpectedly removed two critical online applications for student loan forgiveness and repayment, creating further turmoil in the already strained federal student loan system. The affected applications include the Income-Driven Repayment (IDR) application portal and the federal Direct loan consolidation application, both essential for borrowers seeking lower payments and eventual loan forgiveness.
What are IDR plans and direct loan consolidation?
IDR plans allow borrowers to make student loan payments based on their income and family size. These plans include Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Saving on a Valuable Education (SAVE). Under these plans, borrowers can receive student loan forgiveness after 20 or 25 years of repayment.
Direct loan consolidation, on the other hand, is a crucial mechanism for borrowers looking to qualify for Public Service Loan Forgiveness (PSLF) or get out of loan default. Only Direct federal student loans qualify for PSLF, making consolidation necessary for some borrowers.
No public announcement from the Department of Education
Despite the significance of these removals, the Department of Education did not provide any formal announcement. Borrowers noticed that the application buttons were grayed out on the department’s websites, with only a brief banner message added to notify users.
The removal of the IDR application has far-reaching consequences. New graduates, borrowers needing to recertify their income, and those wishing to switch to a different IDR plan all depend on this online tool. Similarly, the Direct consolidation application is critical for borrowers aiming to qualify for PSLF or those seeking to restore their loans from default.
Tied to recent court ruling on student loan forgiveness
The Department of Education’s move appears to be a reaction to a recent decision by the 8th Circuit Court of Appeals, which expanded an injunction blocking lower payments and forgiveness under several IDR plans. The ruling specifically impacts the SAVE plan, introduced by President Biden, which aimed to lower payments, provide interest subsidies, and expand student loan forgiveness eligibility.
Last week’s court ruling further restricted not just the SAVE plan, but also loan forgiveness under the ICR and PAYE plans. It also halted several borrower-friendly provisions of the SAVE plan, including:
- Preserving previous IDR payments after loan consolidation.
- Automatic annual income recertification.
- Counting certain deferment and forbearance periods toward forgiveness.
- Auto-enrolling delinquent borrowers in IDR plans.
Although the ruling does not overturn the SAVE plan, it casts serious doubt on its future. Loan forgiveness under ICR and PAYE is now in jeopardy, while IBR, which was established separately by Congress, remains unaffected by the injunction.
How this can affect millions of student loan borrowers
If IDR processing is paused again, it could have catastrophic consequences for many borrowers, a Forbes report noted. Borrowers enrolled in IDR plans must recertify their income in the coming months, particularly those in IBR, which is not directly affected by the ruling.
Those stuck in the SAVE plan forbearance may need to switch IDR plans to resume progress toward forgiveness. Borrowers nearing forgiveness thresholds under PAYE or ICR may need to shift to IBR to ensure they qualify for loan discharge.
With uncertainty looming over student loan forgiveness programs, borrowers will need to remain vigilant, explore alternative options, and stay informed about further legal and administrative developments.
Do borrowers have alternative options?
Despite the removal of the online applications, borrowers can still submit paper applications. These can be downloaded from the Department of Education’s forms library and must be submitted with proof of income, such as a recent tax return or pay stub, to their loan servicer.
However, it remains unclear whether this removal signals yet another pause on IDR and consolidation application processing. The Department of Education previously halted IDR processing after an initial injunction in August, leading to massive backlogs. Processing only resumed in December, with delays already affecting thousands of borrowers.
