IDR Enrollment Pause Leaves Borrowers Scrambling for Solutions

WASHINGTON, D.C. — The U.S. Department of Education has halted enrollment for income-driven repayment (IDR) plans, creating uncertainty for borrowers who must recertify their income. The enrollment pause follows a February ruling by a federal appeals court that raises questions about the implementation of several IDR plans.

As the Department of Education reviews repayment applications based on the recent court ruling, borrowers already enrolled in plans such as Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), and Pay As You Earn (PAYE) are left in a precarious position. Those who are due for recertification are unable to confirm their income and family size information, which is critical for maintaining their payment amounts.

“The risk of harm to borrowers is much higher this time,” said Abby Shafroth, co-director of advocacy at the National Consumer Law Center. She urged caution, stating that borrowers who miss their recertification deadlines risk being kicked out of their plans and may face inflated loan balances if interest capitalizes.

Borrowers enrolled in the SAVE plan, however, remain in administrative-placed forbearance and don’t need to worry about immediate payment obligations or recertification deadlines.

If individuals do not recertify their ICR or PAYE plans, they will stay on the same plan but may see their monthly payments increase to what they would owe under a standard repayment plan. “People shouldn’t be making any panicked rush decisions based on something that happened today or yesterday or the day before,” said Betsy Mayotte, president of The Institute of Student Loan Advisors.

Delinquency is a real threat for borrowers who cannot meet the required payments; failure to do so could lead to default. To manage potential financial strain, borrowers are advised to explore options like forbearance or deferment, even though these options come with limitations, such as accruing interest.

The Education Department’s pause on IDR applications comes against the backdrop of increasing concern among borrowers who might find themselves unable to make payments due to unforeseen financial circumstances. “If [borrowers] have a recertification date that is coming up, reach out to the servicer and say, ‘hey, what can I do here?’ Because that’s changing day by day,” suggested Scott Buchanan, executive director of the Student Loan Servicing Alliance.

Recent graduates are particularly impacted, facing higher payments on student loans without the safety net of an IDR plan to reduce monthly obligations. The standard repayment plan, which requires full loan payments over ten years, can place a financial burden on those just entering the workforce.

Borrowers seeking to consolidate their loans to simplify payments face additional challenges. While they can submit paper applications for loan consolidation, current prohibitions prevent servicers from processing these requests. This development raises questions about the future access to IDR plans and other relief options.

“These are temporary stopgaps,” McCarthy noted regarding the deferral strategies available to borrowers. “They’re not long-term plans. It’s not a repayment plan like the income-driven repayment plans are.”

The evolving landscape of student loan repayment regulations means borrowers must stay informed. For the latest updates and personalized guidance, borrowers are encouraged to consult relevant resources and communicate with their loan servicers proactively.