Many borrowers, looking to apply for a new repayment plan for their federal loans or switch plans, were shocked to find that the online application for income-driven repayment (IDR) was suddenly removed on Friday, February 21. Federal courts issued an injunction preventing the U.S. Department of Education from implementing the Saving on a Valuable Education (SAVE) plan, and other IDR plans are now impacted, too.
Here’s what that means for federal student loan borrowers, and what you can do if you need help with your loans.
Applications for Income-Driven Repayment Plans Are Currently Unavailable
IDR plans have longer loan terms than standard repayment plans; depending on the plan, the repayment term ranges from 20 to 25 years. And, IDR plans base borrowers’ payment amounts on a percentage of their discretionary income.
The Biden Administration introduced the SAVE plan as a new IDR plan that could slash the payments for some borrowers, and allow them to qualify for loan forgiveness sooner. However, the SAVE plan was controversial, and it faced legal challenges. Courts blocked some of the provisions of the SAVE plan, and judges later put out an injunction against the plan.
Previously, borrowers could apply for an IDR plan online. However, the online application has been removed from StudentAid.gov. And, the U.S. Department of Education (ED) also removed the application for Direct Consolidation Loans.
“Servicers were made aware the applications were coming down temporarily and are working with our partner [the U.S. Department of Education] on potential next steps as it works to determine how to comply with court ordered injunctions,” said Scott Buchanan, executive director with the Student Loan Servicing Alliance, a non-profit trade association.
What Does This Change Mean for Borrowers?
IDR plans and Direct Consolidation Loans are pivotal tools for those pursuing forgiveness through Public Service Loan Forgiveness (PSLF) or who cannot afford their payments, so the removal of the applications could be a hardship.
Although the removal of IDR and Direct Consolidation Loan applications may seem abrupt, borrowers shouldn’t panic. Although the SAVE plan isn’t an option any longer, other repayment plans will likely be available; the ED needs time to clarify the injunction and update its systems.
“The Department should be making more information and options available shortly to help borrowers continue repayment under payment plans under the law,” said Buchanan. “Some of this is just a process necessitated by the courts to change the applications to offer those plans that are still available and clarify language in the applications, so is more about updating work flows to allow borrowers to select income driven plans that are not impacted by the injunctions. That will just take some time and system work over the coming days.”
It’s unclear how long the applications will be frozen.
What Borrowers Can Do Right Now
Borrowers with student loans impacted by the removal of the IDR and Direct Consolidation Loan applications can take the following steps:
1. Make Sure Your Information Is Up-to-Date
On social media, some federal loan borrowers reported that they received notifications that the loan servicer put their loans into forbearance as the loan servicers and ED work through these issues. Log into your loan account to ensure the loan servicer has your updated email address and mailing address so you receive critical communications. If you aren’t sure who your loan servicer is, contact the Federal Student Aid Information Center.
2. Contact Your Loan Servicer
Even with the applications down, there are still ways to reduce the burden of your loans.
“There are many options still available under the law for borrowers who may be struggling,” said Buchanan. “Those include deferments for things like economic hardship, extended or graduated repayment plans, or even forbearance for temporary relief from payment obligations. Borrowers who are having challenges can reach out to their servicer and see what option available today might best fit their situation. Keep in mind if new options become available, borrowers can always switch plans in the future.”
While you may feel anxious right now at the lack of information readily available, know that updates should be forthcoming.
“I would expect in the coming days some options will become available again as updates occur to allow for IBR or consolidation consistent with the new court guidance,” Buchanan said.
3. Research Other Payment Options
Although SAVE is no longer available, other repayment plans like Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR). You can use the federal student loan simulator to get an idea of what your payments would be under other repayment options.
If you have exhausted federally-based repayment options and are still battling overwhelming payments, consider student loan refinancing. You could lower your interest rate, your monthly payments, or your bottom line on your loan. Explore ELFI’s rate tool to see how refinancing might work for you.
