Many student loan borrowers have encountered a significant repayment obstacle: the U.S. Department of Education has denied their application to switch into a new payment plan. According to a December 15 court filing, the department rejected 327,955 borrower requests to be enrolled in an income-driven repayment plan in August alone. This denial means many of these borrowers may remain stuck in their prior repayment plan with a higher monthly payment or in an interest-accruing forbearance.<\/p>\n
As of the end of November, another 802,730 IDR plan applications remain pending with the Education Department. Millions of student loan holders rely on IDR plans to afford their payments and eventually emerge from their debt. These plans cap borrowers’ monthly bills at a share of their discretionary income and lead to debt cancellation after a certain period, typically 20 years or 25 years.<\/p>\n<\/p>\n
Consumer advocates have expressed alarm over the number of denials. “This could cause further delays \u2014 losing out on qualifying months for Public Service Loan Forgiveness and IDR cancellation \u2014 and many of these borrowers will wind up paying a higher amount each month,” said Persis Yu, deputy executive director and managing counsel at Protect Borrowers. More than 42 million Americans hold student loans, and the outstanding debt exceeds $1.6 trillion.<\/p>\n
The Education Department did not respond to a request for comment. As part of a settlement between the American Federation of Teachers and the Trump administration, the Education Department has been required to provide status reports on its progress on a backlog of hundreds of thousands of IDR plan applications from student loan borrowers.<\/p>\n
The Education Department said in the court filing that it rejected the hundreds of thousands of IDR applications because of an “unforeseen ambiguity” about which repayment plan the borrowers should have been enrolled in. These federal student loan holders had requested to be put in the plan with “the lowest monthly payment,” according to the filing. However, Trump officials said two plans result in an equal monthly bill.<\/p>\n
Yu said the Trump administration’s reasoning did not follow established guidelines. “The IDR application anticipated two possible repayment plans with equal payment amounts and provided a plan for such a case,” Yu said. In these situations, there is a ranking of IDR plans the Education Department is supposed to follow, she added. Higher education expert Mark Kantrowitz also questioned the Trump officials’ explanation.<\/p>\n
If your application for an IDR plan was rejected, file a new request as soon as possible, said Kantrowitz. Borrowers should select a specific plan on their application, “partly because the borrower should make an informed decision,” Kantrowitz said, and also because of the recent denials related to ambiguity over which plan has the lowest monthly payment.<\/p>\n
The Biden administration’s Saving on a Valuable Education, or SAVE, plan is now defunct, after a court blocked the program. And President Donald Trump’s “big beautiful bill” phases out some other IDR plans. As a result, the best current option for many borrowers is the Income-Based Repayment plan, or IBR, Kantrowitz said. Under the terms of IBR, borrowers pay 10% of their discretionary income each month \u2014 though that share rises to 15% for certain borrowers with older loans.<\/p>\n