The Department of Education (DoE) suspended four income-driven repayment (IDR) plans in a major shakeup, which means millions of borrowers are now paying more money on their student loan repayment. The affected plans include:
- Income-contingent repayment (ICR)
- Pay As You Earn (PAYE)
- Income-Based Repayment (IBR)
- A Valuable Education (SAVE)
The plans were meant to make monthly payments lower; they were made by having them calculated as a function of what a borrower earns and the size of his family. In addition, they were able to forgive after 20 or 25 years of repayment. Borrowers’ options have been reduced as a result of the suspension of their loans and they may have to change to standard or extended repayment plans, the latter of which generally involves larger monthly payments.
It comes after a court injunction that blocked the SAVE plan, which was presented by the Biden administration. During this period, however, income-driven applications to plans are not being processed.
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The Impact on Borrowers
Such a suspension of these plans will be a big financial burden on borrowers. A lot of people who were able to hang on using lower payments may now be unable to pay their bills. Reports show that by February 2025, about four million were more than 90 days late on payments owed, double the number from 2019.
Student loan repayment is a topic that has caused widespread concern due to the uncertainty as to when it will come due to one’s own resources. The court injunction lasts for three months and after that, it is unclear what will happen. Borrowers might have to rewrite the plans to higher payments or seek other relief options if these plans remain suspended.
Trump’s Executive Order on Student Loan Forgiveness
In addition to the repayment plan suspensions, it emerges that former President Donald Trump issued a controversial executive order, that could significantly limit student loan forgiveness on the Public Service Loan Forgiveness (PSLF) program. Borrowers working in public service jobs—teachers, either domestic or foreign, nurses, government workers, etcetera—are eligible for loan forgiveness under the PSLF program on the condition that they have made 120 qualifying payments.
According to Trump’s order, some nonprofit groups would be excluded from eligibility under PSLF. One order targets organizations the administration views as promoting ‘national security and American values,’ and the other order targets organizations that are deemed as contrary to ‘national security and American values.’ Civil rights groups, immigration rights organizations, LGBTQ advocacy groups, and others could all be affected by this broad classification.
Is the Executive Order Legal?
The question is whether Trump’s order legally alters PSLF eligibility. Congress created the program and usually requires major changes to the program to be made by congress, rather than an executive order. It is anticipated that legal challenges will be taken by advocacy groups who say the order violates constitutional rights and is discriminatory.
Even if the order were made, PSLF rules would be changed likely over a period of years because changes would require a formal regulatory process. As for today, lenders recommend to borrowers still on pace for loan forgiveness to keep making their qualifying payments and monitor any developments in legal matters.
What Borrowers Can Do Next
In light of these recent changes, borrowers should take the lead in staying in the know and tending to their student loan debt well. Here are some key recommendations:
- Check Out Your Current Repayment Plan – If you were following an income-driven repayment plan, you’ll want to make sure that you are choosing a plan instead.
- Stay Informed of Government Decisions – Updates to government policy may present challenges to the purposes of Gitcoin and the security of people using the platform.
- Find a Financial Advisor – A financial advisor can help review loan repayment options.
- Support Borrowers’ Rights movement – Those affected by these changes can become advocates for the policies that forbid such unimaginable loans and for the types of loan forgiveness that should be offered to borrowers.
