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Forbes
4 days ago
- Business
- Forbes
Big Update On Student Loan Repayment Plan Processing And PSLF Shows Uneven Progress
UNITED STATES - JUNE 3: Secretary of Education Linda McMahon arrives to testify at the Senate ... More Appropriations Labor, Health and Human Services, Education, and Related Agencies Subcommittee hearing on Tuesday, June 3, 2025. The Department of Education filed a status update on application processing for IDR plans and PSLF Buyback this week. (Bill Clark/CQ-Roll Call, Inc via Getty Images) The Department of Education filed a new update on Tuesday detailing its progress on working through a massive backlog of student loan repayment applications for income-driven repayment plans, as well as requests for PSLF Buyback. The filing shows the department has made a modest dent in IDR applications, although questions and concerns (and tens of thousands of unprocessed applications) remain. Meanwhile, the department appears to have not made much progress reducing the backlog of pending PSLF Buyback applications – in fact, the backlog has grown. The latest filing on behalf of Secretary of Education Linda McMahon is required under an interim agreement between the department and the American Federation of Teachers, which sued the Trump administration in March over the department's suspension of all IDR application processing the prior month. The suspension caused chaos throughout the federal student loan repayment system, preventing borrowers from enrolling in any income-driven plan and blocking some borrowers from being able to pursue Public Service Loan Forgiveness, a popular student loan forgiveness program for nonprofit and government workers. The department had argued that the move was necessary after a federal appeals court issued a sweeping new order blocking the SAVE plan, one of several income-driven repayment options, in a separate legal challenge over the future of that program. After the department resumed IDR application processing in April for the ICR, IBR, and PAYE plans, administration officials and the AFT agreed to temporarily pause the litigation to assess processing progress through monthly status reports. Here's where things stand with IDR and PSLF Buyback processing for student loan borrowers after the most recent status report filing. The Department of Education's first status report was filed in May, and confirmed what many student loan borrowers had suspected – that the administration had made minimal progress in processing hundreds of thousands of pending IDR applications. Through April 30, the department had processed only 79,349 applications, with nearly two million remaining outstanding. But observers noted that processing had only recently resumed at that point, and hadn't fully ramped up yet. In its latest status report filed on Tuesday, the department showed modest progress. Through May 30, the department has processed 285,694 IDR applications, while 1,582,641 applications remain outstanding. The processing rate for IDR requests appears to have accelerated somewhat since April – which makes sense, given that the department indicated in earlier court filings that the IDR application processing system would not be fully operational again until May 10. But clearly, the department has a long way to go. In addition, questions remain about the details underlying these numbers. Some federal student loan borrowers have been reporting issues with their online IDR applications (for instance, some borrowers who qualify for the PAYE plan have been unable to select that plan in the online application). It is unclear to what extent these issues are reflected in the department's numbers. One major student loan servicer added additional complications to the landscape when it posted an announcement earlier this month suggesting that many borrowers may need to reapply for IDR if they submitted an application before April 27. The processing figures posted in the Department of Education's latest filing only reflect the number of IDR applications 'approved or denied.' The department did not provide a more detailed breakdown. Borrowers whose IDR applications are denied by their loan servicer would have to reapply, adding to the application queue yet again. While IDR application processing appears to be slowly ramping up, the Department of Education posted less rosy figures for the PSLF Buyback program. PSLF Buyback is a relatively new option that allows borrowers pursuing Public Service Loan Forgiveness to submit a formal request to make a lump sum payment covering certain periods of forbearance so that they can count toward student loan forgiveness under the program. PSLF provides borrowers with loan forgiveness on qualifying Direct federal student loans after the equivalent of 10 years of qualifying payments; but only repayment periods under eligible repayment plans can count – most periods of deferment and forbearance do not. Many borrowers stuck in the SAVE plan forbearance, which doesn't count toward student loan forgiveness, who are in their final year of PSLF have submitted PSLF Buyback requests. But few have received a response. On Tuesday, the Department of Education's latest status report continues to show concerningly slow progress in working through the PSLF Buyback application backlog. In its prior status report covering the month of April, the department had indicated that only 1,472 PSLF Buyback applications had been processed, with more than 49,000 applications in a backlog. In the latest report, the department said that 3,312 PSLF Buyback applications were processed during the month of May. That's a modest jump from the prior month. But the department also revealed that the PSLF Buyback application backlog has actually grown to 58,761. The department's slow processing rate of PSLF Buyback applications appears to not be keeping pace with the ongoing influx of requests submitted by borrowers. The department has provided no explanation for the slow progress in getting through PSLF Buyback applications, although it could be related to substantial staff reductions at the Department of Education ordered by the Trump administration earlier this year. That 'reduction in force' is the subject of a major legal challenge, which has now reached the U.S. Supreme Court. The Department of Education's latest update comes as uncertainty continues to grip the federal student loan repayment system. Earlier this week, Senate Republicans unveiled their higher education component of the proposed 'one big, beautiful' reconciliation bill to enact President Donald Trump's legislative agenda. It largely retains most elements of the bill that the House successfully approved last month, and would repeal most existing IDR plans for current borrowers including ICR, PAYE, and SAVE. Student loan borrower advocates have warned that this could dramatically increase the monthly payments for millions of Americans. The bill would create a new IDR plan called the Repayment Assistance Plan, but the Senate version appears to strip out certain protections for married borrowers that were in the House version of the bill, potentially increasing their payments, as well. Meanwhile, the department is moving forward with negotiated rulemaking to enact what could be significant regulatory changes to the PSLF program. President Trump issued an executive order in March to bar student loan forgiveness under PSLF for organizations that the administration deems are engaged in 'illegal' or improper behavior, and the order directed the department to draft regulations to implement those restrictions. Critics have argued that this is an attempt to 'weaponize' PSLF against nonprofit organizations, state governments, and cities that oppose the Trump administration's priorities, and would hurt student loan borrowers while chilling public service work. Some observers expect there to be legal challenges if the proposals are implemented.
Forbes
10-06-2025
- Business
- Forbes
This Student Loan Servicer Says You May Need To Reapply For Your IDR Plan — Key Details
The income-driven repayment application system for federal student loans remains a mess, as borrowers struggle to navigate programs that have been plagued by legal challenges and processing pauses. Now, one major student loan servicer has thrown an additional wrench into the system by announcing that some borrowers who have already submitted an income-driven repayment application may need to reapply. Income-driven repayment (or IDR) plans offer borrowers affordable monthly student loan payments based on their income and family size. IDR is a category of repayment plans that encompasses several specific programs including Income-Contingent Repayment, Income-Based Repayment, Pay As You Earn, and Saving on a Valuable Education. These plans are often referred to by their acronyms – ICR, IBR, PAYE, and SAVE, respectively. Payments under all of these plans are typically recalculated every 12 months, and the payments can change over time as a borrower's income changes. IDR plans historically have also provided pathways to student loan forgiveness. Typically, borrowers can qualify for loan forgiveness after 20 or 25 years in repayment. That timeline can be reduced to as little as 10 years for borrowers working in nonprofit or government jobs, as enrolling in IDR plans is usually required for borrowers pursuing Public Service Loan Forgiveness, or PSLF. But the IDR application system has been in turmoil for most of this year. And now, some borrowers won't even realize that they may need to submit a new IDR application, which MOHELA – one of several major student loan servicers contracted with the Department of Education – announced certain borrowers will need to do. Here's what you should know. The problems with the IDR system began with a lawsuit filed last year against the Biden administration over the SAVE plan. The challenge brought by a coalition of GOP-led states argued that the SAVE plan was an abuse of executive branch authority and exceeded what Congress had authorized when it passed legislation creating income-driven plans for federal student loans more than 30 years ago. Last summer, a federal appeals court blocked the SAVE program, throwing the entire IDR system into disarray and forcing more than eight million borrowers who had enrolled in SAVE into a forbearance. Then, in February of this year, the court expanded that earlier injunction, injecting even more chaos and uncertainty into the federal student loan repayment system. In response, the Trump administration temporarily suspended the entire IDR application system, arguing that it had no choice due to the breadth of the court's order. 'The latest court actions significantly affect preexisting ED rules on its loan programs and IDR plans,' said the Department of Education in web guidance provided to borrowers. 'The most recent court actions require a pause to everything' The department subsequently restored the IDR application and resumed processing, but only after the American Federation of Teachers filed a lawsuit in March, arguing that the systemwide IDR application and processing suspension was unlawful and had illegally prevented borrowers from accessing affordable payments and student loan forgiveness programs authorized by Congress. Because of the shutdown, borrowers could not enroll in an IDR plan, recertify their income, apply to switch IDR plans or leave the SAVE plan forbearance, which has halted student loan forgiveness progress for more than eight million Americans. The AFT and the Trump administration then reached an agreement in April to pause the litigation to give the Department of Education time to ramp up IDR application processing. Borrowers could submit IDR applications again by the end of March, but processing did not fully resume until early May. Under the terms of the interim agreement, the department must file monthly status reports detailing loan servicers' progress in processing IDR applications. As of the May 15 status report, more than 1.9 million IDR applications remained outstanding. The Department of Education has been accepting IDR applications since the online form was restored at the end of March. But this month, MOHELA – one of the department's major contracted loan servicers – announced on its website that borrowers who submitted an IDR application prior to April 27, 2025 may need to reapply. 'Good news! Processing has resumed for IBR, PAYE, and ICR plans,' says the MOHELA announcement. 'Thanks to system updates, MOHELA can now quickly process applications with verified income. If you applied before April 27, 2025, your application didn't include income info. Please reapply at for faster processing. Your old application will then be canceled automatically.' MOHELA provided no additional details as to why borrowers who applied for IDR before April 27, 2025 would need to reapply, particularly those who did include income documentation with their application. No other Department of Education loan servicer (including Nelnet, Edfinancial, or Aidvantage) appears to have a similar message posted on their own websites. MOHELA has in the past been accused of providing misleading information to federal student loan borrowers. The servicer was penalized by the Biden administration for allegedly providing untimely or incorrect billing statements when student loan repayment resumed after the pandemic-era pause. More recently, MOHELA sent out misleading letters to borrowers in the SAVE plan forbearance, falsely suggesting that interest has been accruing on their balances. This prompted MOHELA to issue a clarifying statement on its website. The big question for many federal student loan borrowers is whether they actually need to reapply for IDR, particularly if they submitted an application prior to April 27, 2025, the cutoff date referenced in MOHELA's announcement. MOHELA's statement suggests that IDR applications submitted online through will be processed quickly, but it's unclear if that is actually happening (particularly without first evaluating the Department of Education's next scheduled court-mandated IDR status update, which isn't due until later this month). Here are some important considerations: For federal student loan borrowers with MOHELA-serviced loans who applied for IBR, ICR, or PAYE prior to April 27, 2025, and who properly included income documentation with their IDR application, the situation is less clear. MOHELA's statement on its website suggests these borrowers should reapply, but does not explain why, other than saying the applications did not include income documentation. Borrowers in this situation may want to contact MOHELA for clarification before submitting a new IDR request. However, reaching MOHELA may be difficult – Senator Elizabeth Warren (D-Mass) told Education Secretary Linda McMahon in a letter in March that the Department of Education had found that 'MOHELA took longer to answer borrowers' phone calls than any other federal loan servicer.'
Forbes
09-06-2025
- Politics
- Forbes
Is Trump Eliminating Student Loan Forgiveness Under PSLF? Advocacy Groups Raise Alarms
US President Donald Trump talks to reporters at on June 8, 2025, en route to Camp David. The Trump ... More administration has taken steps to limit student loan forgiveness under the PSLF program, advocacy groups warn. (Photo by ANDREW CABALLERO-REYNOLDS / AFP) (Photo by ANDREW CABALLERO-REYNOLDS/AFP via Getty Images) Student loan borrower advocacy organizations are warning that the Trump administration is taking concrete steps to try to limit student loan forgiveness for public servants under a popular debt relief program. And the groups are increasingly raising the alarm. Public Service Loan Forgiveness, or PSLF, allows borrowers to receive a complete discharge of their federal student loans after making the equivalent of 10 years of qualifying payments. These payments must be made under certain repayment plans while the borrower works full-time in eligible nonprofit or government employment. To date, more than a million borrowers have received student loan forgiveness through PSLF, most through improvements to the program implemented during the Biden administration. But President Donald Trump has taken a different approach, arguing that PSLF is wasteful, costly, and rewards organizations whose interests are not aligned with the administration's. And the Department of Education may be moving towards limiting the program. Here's the latest. In March, President Trump issued an executive order to limit student loan forgiveness under PSLF by cutting off organizations that engage in certain activities. He characterized the move as eliminating fraud and waste for taxpayers, and protecting American interests. 'The PSLF Program has misdirected tax dollars into activist organizations that not only fail to serve the public interest, but actually harm our national security and American values, sometimes through criminal means,' said Trump in the order. 'The PSLF Program also creates perverse incentives that can increase the cost of tuition, can load students in low-need majors with unsustainable debt, and may push students into organizations that hide under the umbrella of a non-profit designation and degrade our national interest, thus requiring additional Federal funding to correct the negative societal effects caused by these organizations' federally subsidized wrongdoing.' The order would bar student loan forgiveness eligibility under PSLF for organizations that engage in certain activities, such as 'aiding or abetting" violations of federal immigration laws, 'child abuse" (which the order appears to define as facilitating gender-affirming care for transgender youth), and 'aiding and abetting illegal discrimination' which could be read to include diversity, equity and inclusion initiatives. Student loan borrower advocacy organizations warned that the order is vague and broadly worded, and could be used to 'weaponize' PSLF against organizations and institutions whose policy aims simply don't align with the Trump administration. This could, for instance, include any immigrant rights organization, hospitals that provide medical treatment to transgender youth, or state governments that maintain diversity programs. President Trump's executive order does not have immediate effect. Rather, it directs the Department of Education to draft regulations implementing the order. To do that, federal law requires that the department go through a lengthy process called negotiated rulemaking. This process, which can take a year or longer, involves the creation of a rulemaking committee comprised of key stakeholders, and opportunities for individuals and organizations to submit public comments. In May, a coalition of nearly 200 organizations submitted a formal public comment to the Department of Education as part of the initial phase of negotiated rulemaking, arguing that the rulemaking process was simply a pretext to rubber stamp President Trump's PSLF executive order and restrict student loan forgiveness under the program. 'We write in strong opposition to the Trump Administration's attempts to implement Project 2025, which calls for gutting Income-Driven Repayment (IDR) options and ultimately eliminating PSLF, which will only push borrowers further into debt and relief further out of reach,' wrote the organizations. The coalition echoed the responses of other student loan borrower groups, which have argued that the Trump administration's proposed changes to PSLF are unlawful. Only Congress can change PSLF, the contend, and the statute governing the PSLF program does not confer any authority on the department to pick and choose which otherwise-qualifying organizations can be eligible for student loan forgiveness under the program. 'We were incredibly troubled to see President Trump's executive order aimed at limiting access to PSLF for public service workers employed at organizations engaging in work that is not in line with President Trump's agenda,' wrote the group. 'The Department's efforts to engage in rulemaking to make unlawful changes to PSLF eligibility are directly related to the goals of this executive order, exceed the Administration's authority outright, and have already had a chilling effect on public service organizations doing necessary work on behalf of our most vulnerable communities. The Higher Education Act is crystal clear that a 'public service job' includes any employment in government or at a 501(c)(3). We strongly oppose any effort by the Trump Administration to limit PSLF eligibility to cherry pick organizations that they may not agree with.' With the initial public comment period complete, the Department of Education is now in the process of creating a formal negotiated rulemaking committee to proceed with regulatory changes to student loan forgiveness under the PSLF program. The rulemaking committee is supposed to include representation from key stakeholders. But student loan borrower advocacy groups are raising alarms that the department is trying to limit the participation of pro-PSLF voices. In the past, department rulemaking committees have included representatives from key constituent groups such as legal assistance organizations, state officials, consumer advocates, individuals with disabilities, and student loan borrowers in repayment. While the department confirmed in its committee nominations announcement that some of these constituencies would have representation on the committee, others were not clearly included. Last week, dozens of organizations wrote to the department, demanding that additional representatives be allowed to participate in the negotiated rulemaking process to voice support for preserving student loan forgiveness under the PSLF program. 'We are concerned that the Trump Administration is using this negotiated rulemaking session to make harmful changes to Income-Driven Repayment plans and the Public Service Loan Forgiveness Program— both of which act as critical components of the student loan safety net and provide critical debt relief to workers in public sector jobs,' wrote the group in its letter. 'Given the breadth of experiences that will be affected as a result of this rulemaking, borrower voices, whether directly or through advocacy organizations, must be prioritized. In particular, entities that represent legal aid organizations, consumer advocacy organizations, and civil rights organizations should be separate and distinct categories to ensure proper representation for each of these essential stakeholder groups. Individuals with disabilities or groups representing them should also be included.' 'The Trump Administration's proposal to cram civil rights, legal aid, and consumer advocacy groups into fewer seats is a naked attempt to stack the decks against borrowers and engineer a predetermined outcome for this rulemaking," said Student Borrower Protection Center Deputy Executive Director and Managing Counsel Persis Yu in a statement last week. 'The financial lives of millions of borrowers are at stake.' For now, there are no changes to student loan forgiveness under PSLF. 'We are reviewing the recent Executive Order regarding the Public Service Loan Forgiveness (PSLF) Program,' says a banner notice on the Department of Education's website. 'There are no changes to PSLF currently, and borrowers do not need to take any action.' Any changes to student loan forgiveness eligibility that result from Department of Education updates to PSLF regulations are likely at least a year away. And depending on the scope of those changes, some observers expect there to be legal challenges, given that the PSLF statute passed by Congress nearly 20 years ago does not provide clear authority to the Department of Education to limit eligibility to otherwise-qualifying nonprofit and public organizations. In the meantime, borrowers should keep an eye out for subsequent negotiated rulemaking developments, as there will be additional opportunities to submit a public comment in the coming months.
Yahoo
06-06-2025
- Business
- Yahoo
NCLA Asks Sixth Circuit to Revive Suit Over Dept. of Education's Illegal Student Loan Payment Pause
Mackinac Center for Public Policy v. U.S. Department of Education; Sec'y of Education Linda McMahon, in her official capacity; and James Bergeron, Chief Operating Officer of Federal Student Aid, in his official capacity Washington, DC, June 06, 2025 (GLOBE NEWSWIRE) -- The New Civil Liberties Alliance filed an opening brief today asking the U.S. Court of Appeals for the Sixth Circuit to reverse a district court's dismissal, for lack of standing, of our Mackinac Center for Public Policy v. Dept. of Education lawsuit against the Department's unlawfully forgiving 35 months of interest on student loans. Without any statutory authority, the Department extended Congress's original six-month interest forgiveness and payment suspension for nearly three more years, cancelling debt in violation of the Constitution's Appropriations Clause at a cost of at least $175 billion to taxpayers, harming the Mackinac Center in the process. This scheme injures public-service employers like Mackinac by reducing the financial incentives for (potential) employees to participate in the Public Service Loan Forgiveness (PSLF) program. The Sixth Circuit should decide Mackinac does have standing and require the district court to hear the case on the merits against the Department's unlawful policy. Established by Congress, the PSLF program allows employees to have their student-loan debt forgiven after ten years of work with one or more public-service employers. When the Department excused debtors from paying interest on their loans, it decreased—dollar for dollar—the wage subsidy the program promised to public-service employers like the Mackinac Center, making it more expensive for them to keep compensating their PSLF employees at the same level. The economic harm caused by the Department's unlawfully excusing student-loan debtors from honoring their obligations is enough, on its own, to require the government to answer for its actions in court. But in addition to that, the Department's lawless decisions also skewed the labor market in a way that frustrates the congressionally-designed PSLF program, increases the cost for the Mackinac Center to compete for college-educated employees, and costs taxpayers billions. The Department caused these injuries, and now the Court of Appeals should make sure it must answer for them. NCLA released the following statements: 'Governmental agencies cannot blithely ignore the law without expecting to answer for the harm their unlawful actions cause organizations like the Mackinac Center. We trust the Court of Appeals will make that clear to the Department of Education.'— Daniel Kelly, Senior Litigation Counsel, NCLA 'The Department of Education under Secretary McMahon should settle this case. What possible reason does it have to keep defending the lawless regime instituted by former Secretary Miguel Cardona and Richard Cordray to forgive student-loan debt—or in this case interest on that debt—without authority from Congress?'— Mark Chenoweth, President, NCLA For more information visit the case page here. ABOUT NCLA NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA's public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans' fundamental rights. ### CONTACT: Joe Martyak New Civil Liberties Alliance 703-403-1111 in to access your portfolio
CNET
29-05-2025
- Business
- CNET
SAVE Student Loan Borrowers Likely Won't Make Payments This Year, but Should Do This One Thing Now
Pla2na/Getty Images/CNET It's been a trying year for anyone enrolled in the Saving on a Valuable Education student loan repayment plan. There's been a barrage of student loan updates in 2025: proposed changes to Public Service Loan Forgiveness eligibility, an effort to restart collections on defaulted student loan accounts and a new Republican-fronted bill seeking to change existing income-driven repayment plan options. But the biggest news for most borrowers has been the court ruling blocking the SAVE repayment plan for 8 million borrowers. However, since that news, very little has been shared about what's next for SAVE borrowers. Currently, your loan payments remain paused in a general forbearance and your balance isn't collecting interest. That also means you're not making progress toward a loan forgiveness program like PSLF during the payment pause. While you can choose to switch to an alternative repayment plan, most experts suggest sticking with SAVE, and doing this one thing ahead of payments resuming. Here's what you need to know about when payments will restart for SAVE borrowers, how to choose a different income-driven repayment plan and what experts say you should do during this downtime. Read more: How Much Could Student Loan Payments Skyrocket for SAVE Borrowers? We Did the Math When will payments restart for student loan borrowers in SAVE? It's not clear when payments will start again for borrowers on the SAVE plan but it's looking like the end of this year would be the earliest timeframe. The Department of Education's website says SAVE plan borrowers will stay in a general forbearance until at least the fall. It also directed loan servicers to adjust the income recertification deadline to no earlier than Feb. 1, 2026. Robert Farrington, student loan expert and founder of The College Investor, expects the general forbearance to last even longer. "Borrowers will likely see the SAVE forbearance end in mid-to-late 2026," says Farrington. "Many borrowers are already reporting the end date of their forbearance moving to September 2026." Should PSLF borrowers in SAVE switch to another repayment plan? If you're a teacher, nurse or other public servant pursuing PSLF, you may be worried that the payment pause is not counting toward your 120-payment requirement. That leaves you with three options. First, you could switch from SAVE to another income-driven repayment plan (ICR, IBR or PAYE). That way, your payments will count toward PSLF's 120-payment requirement. Alternatively, if you would have hit 120 months of on-time payments if not for the pause, you can apply for the PSLF Buyback program to get credit for your time in forbearance. "This program [allows borrowers] to make a lump-sum payment for any months spent in administrative forbearance under SAVE, ensuring those months count towards PSLF," explains Megan Walter, NASFAA senior policy analyst. The downside of these first two options is that borrowers have been reporting processing delays. So don't expect a fast response. Last, if you've recently enrolled in PSLF or are not close to receiving forgiveness, you might prefer to wait until you're moved into a new payment plan. Yes, your months in forbearance won't count toward your 120-payment goal, but this could give you time to start saving for a potentially higher student loan payment. Whether you decide to change plans now or wait, make sure your decisions align with your financial goals. With SAVE no longer an option, it's important to understand all your avenues for paying back your student loans. What should SAVE borrowers do now? That doesn't mean you should sit back and do nothing, though. Take this time to prepare for the likelihood that your payments will increase in the future. You can use the Federal Student Aid's Loan Simulator tool to help calculate how much your monthly payment will be under different payment plans. While your payments are paused, you won't have to worry about your account being moved to collections. Although borrowers with defaulted loans are once again subject to collections, including wage garnishment, those enrolled in the SAVE plan don't have to worry about those consequences for now. Use this time to improve your finances, suggested Farrington. "This is a great time to pay off other debts (including private loans), build an emergency fund, contribute to an IRA and more." If you have the wiggle room in your budget, start paying yourself each month the same amount you'd pay your student loan servicer. Put this money into a high-yield savings account to earn a little extra interest on your savings.
