AMERICANS are in a state of panic as the status of their loans remains in limbo, leaving them waiting to know if their payments will be canceled or not.
As student borrowers are at a standstill regarding their loan forgiveness status, an August 1 deadline is looming for millions of Americans.
Borrowers are being confronted with several changes to the country’s student loan system[/caption]
Roughly two million borrowers are enrolled in Income-Based Repayment, or IBR, plans, one of several income-driven repayment, or IDR, plans available for federal student loans.
IBR borrowers qualify to have their loans forgiven after 20 or 25 years of payments, depending on when the loans were taken out.
However, the US Education Department has temporarily paused the cancellation of IBR student loans as it addresses a federal court order impacting IDR plans.
Court injunctions from February blocking the Biden administration’s SAVE plan have necessitated system updates that have temporarily impacted IBR forgiveness processing.
The Department of Education announced the pause on its Federal Student Aid site in early July in an FAQ.
“Currently, IBR forgiveness is paused while our systems are updated to accurately count months not affected by the court’s injunction. IBR forgiveness will resume once those updates are completed,” wrote the department.
Although the injunctions do not block the IBR plan itself, they have impacted underlying regulations that determine how qualifying months are counted across all IDR plans.
The litigation that blocked the entire regulatory package SAVE was under in turn paused payment count tracking, leaving Americans unable to view their loan forgiveness payment progress.
“When the latest injunction blocked the whole package, that meant that the Department of Education could no longer count those periods of deferment and forbearance going forward from February,” Betsy Mayotte, president of the Institute of Student Loan Advisors, previously told CNN.
“And so, because of that change, they had to take the counter down so they could either wait out the litigation or reprogram it to not reflect those particular deferments and forbearances from February forward.”
However, IBR loan forgiveness will resume once the Education Department can establish the correct payment count, Ellen Keast, the Education Department’s deputy press secretary, told CNN.
Although forgiveness has been paused for the time being, borrowers can continue making payments on their student loans.
“For any borrower that makes a payment after the date of borrower eligibility, the Department will refund overpayments when the discharges resume,” said Keast.
The temporary halt on IBR plan forgiveness likely will not last long, Scott Buchanan, executive director of the Student Loan Servicing Alliance, told the outlet.
Student Loan Statistics
- Student loan debt in the US is over $1.777 trillion
- Federal student loan debt accounts for 92.2%
- Average federal student loan debt amount per person is $38,375
- Students at a public university borrow $31,960 on average to attain a bachelor’s degree
Credit: Education Data Initiative
INTEREST-ING
The pause on student loan forgiveness comes during a period of several other major switch-ups to the country’s student loan system.
For example, the Department of Education is planning to roll out another major change starting next month as it adheres to the court order blocking Biden’s SAVE plan.
Because of all the legal challenges, borrowers on the SAVE plan were placed in an administrative forbearance, meaning they did not have to make payments.
While this forbearance was initially interest-free, the court injunctions ended the Department of Education’s authority to keep the interest rate at 0% for these borrowers.
Under the department’s direction, federal student loan services will once again charge interest for the nearly eight million Americans in SAVE plans beginning on August 1.
Although payments are not yet due, interest will start to be added to the loan balances again.
Meanwhile, Trump’s One Big Beautiful Bill, recently signed into law, is rolling out new policies regarding student loans, limiting borrowers to just two repayment options.
Plus, paychecks could be wiped out by 15% after nearly 6 million Americans are 90 days past due on loans.
The US Department of Education has paused forgiveness on IBR student loans[/caption]
