Learn how student loan forgiveness works under the Income-Based Repayment (IBR) plan, why forgiveness is paused, and what other repayment plans are affected.
Student Loan Forgiveness Under IBR — What You Need to Know
Student loan forgiveness under the Income-Based Repayment (IBR) plan provides relief by adjusting monthly payments based on income and family size, with remaining balances forgiven after 20 or 25 years. However, recent pauses by the Department of Education, tied to system updates and court rulings, have left many borrowers uncertain. This guide explains how IBR works, why forgiveness is currently paused, which other plans are affected, and what borrowers can do while waiting for updates.
1. How Does the Income-Based Repayment (IBR) Plan Work?
The Income-Based Repayment (IBR) Plan is designed to make student loan payments more manageable by adjusting monthly amounts according to a borrower’s income and family size. Under this plan, your monthly payment is calculated as a percentage of your discretionary income—typically 15% if you borrowed before July 1, 2014, and 10% if you are a new borrower after that date.
Each year, your payment amount is recalculated based on updated income and family size information. If you do not fully repay your student loans within the repayment term—which is 20 years for loans taken before July 1, 2014, and 25 years for loans after that—any remaining balance is forgiven. This forgiveness offers borrowers relief from long-term debt, but it is important to note that the forgiven amount may be considered taxable income by the IRS.
IBR is part of a broader set of income-driven repayment plans aimed at helping borrowers balance loan repayment with their financial situation, reducing the risk of default and financial hardship.
2. What Other Income-Driven Repayment Plans Have Been Paused?
In addition to the Income-Based Repayment (IBR) plan, several other income-driven repayment (IDR) plans have been paused due to legal challenges and policy changes. These include:
Pay As You Earn (PAYE) Plan
The PAYE plan calculates monthly payments as 10% of a borrower's discretionary income, divided by 12, but never more than the 10-year Standard Repayment amount. However, forgiveness under the PAYE plan has been suspended due to ongoing legal challenges. As a result, borrowers enrolled in PAYE are not currently receiving credit toward loan forgiveness. NerdWallet+2Politico+2Ascent Funding+2
Saving on a Valuable Education (SAVE) Plan
The SAVE plan, which replaced the Revised Pay As You Earn (REPAYE) plan, offered lower monthly payments based on income and family size. However, a federal court injunction has blocked the implementation of the SAVE plan, halting its use for calculating monthly payments and loan forgiveness. Borrowers enrolled in SAVE are now in administrative forbearance, meaning they are not required to make payments, and interest is not accruing. Ascent Funding
Income-Contingent Repayment (ICR) Plan
The ICR plan calculates monthly payments as the lesser of what you would pay on a fixed 12-year repayment plan adjusted based on income or 20% of your discretionary income, divided by 12. Similar to the PAYE and SAVE plans, forgiveness under the ICR plan has been paused due to legal challenges. As a result, borrowers in the ICR plan are not currently receiving credit toward loan forgiveness. Poli
The U.S. Department of Education has stated that forgiveness features of these plans are currently paused due to court rulings. Borrowers are encouraged to explore alternative repayment options and stay informed about updates from the Department of Education. Forbes+1Federal Student Aid+1
3. Trump Administration Suspends Student Loan Forgiveness Under IBR: What Does It Mean?
In a significant policy shift, the U.S. Department of Education, under President Donald Trump's administration, has suspended student loan forgiveness under the Income-Based Repayment (IBR) plan. This move has left many borrowers uncertain about their financial futures.
Understanding the Suspension
The Department of Education announced that IBR forgiveness is paused while system updates occur. The department stated, "Currently, IBR forgiveness is paused while our systems are updated to accurately count months not affected by the court’s injunction," referring to legal challenges related to other income-driven repayment plans like the SAVE plan. mint
Impact on Borrowers
Approximately 2 million borrowers enrolled in the IBR plan are affected by this suspension. Many of these borrowers were approaching the 20- or 25-year repayment threshold for forgiveness. The pause means that even if borrowers have made the required number of payments, their loans will not be forgiven until the system updates are completed. FingerLakes1+1Meyka+1
Political and Legal Context
The suspension comes amid broader changes in federal student loan policies, including the proposed dismantling of the Department of Education. Critics argue that these policy shifts may disrupt the stability of the federal student loan system and negatively impact borrowers. Business Insider+1The Economic Times+1
What Borrowers Can Do
While the suspension is in effect, borrowers should:
• Stay Informed: Regularly check updates from the Department of Education regarding the status of the IBR forgiveness program.
• Maintain Payments: Continue making monthly payments to avoid default.Facebook+17The Guardian+17Hindustan Times+17
• Consult Loan Servicers: Reach out to loan servicers for guidance on managing payments during the suspension period.
The Department of Education has indicated that forgiveness will resume once system updates are completed. Borrowers are encouraged to stay proactive and seek assistance as needed.
4. Why Was IBR Forgiveness Discontinued Temporarily?
The suspension of Income-Based Repayment (IBR) forgiveness stems from a federal court ruling that questioned the U.S. Department of Education's authority to grant loan forgiveness under the Higher Education Act of 1993. This decision has led to a temporary halt in processing forgiveness for borrowers enrolled in IBR, as well as other income-driven repayment (IDR) plans. Jagranjosh.comFingerLakes1
Legal Challenges and Court Rulings
The court's injunction primarily targeted the Saving on a Valuable Education (SAVE) plan, a newer IDR option introduced during the Biden administration. However, the ruling's implications extended to all IDR plans, including IBR, due to their shared regulatory framework. As a result, the Department of Education paused forgiveness under IBR to comply with the court's order and to update its systems accordingly.
System Updates and Processing Delays
In its official statement, the Department of Education indicated that the pause in IBR forgiveness is necessary to "update our systems to accurately count months not affected by the court’s injunction." These updates are crucial for ensuring that borrowers' progress toward forgiveness is properly tracked and that any future discharges are processed correctly.
Impact on Borrowers
The suspension has left many borrowers in a state of uncertainty, particularly those who have been making payments under IBR for 20 to 25 years and were anticipating forgiveness. While the Department of Education has stated that forgiveness will resume once system updates are completed, no specific timeline has been provided, adding to borrowers' concerns.
What Borrowers Can Do
During this period, borrowers are advised to continue making their monthly payments to avoid default. Additionally, they should stay informed by regularly checking updates from the Department of Education and consult their loan servicers for guidance on managing their accounts. It is also recommended to keep records of all communications and payments made during this time.
5. Why Is Student Loan Forgiveness Relief Under IBR Delayed?
The suspension of Income-Based Repayment (IBR) forgiveness is primarily due to a federal court ruling that questioned the U.S. Department of Education's authority to grant loan forgiveness under the Higher Education Act of 1993. This decision has led to a temporary halt in processing forgiveness for borrowers enrolled in IBR, as well as other income-driven repayment (IDR) plans. Jagranjosh.com
Legal Challenges and Court Rulings
The court's injunction primarily targeted the Saving on a Valuable Education (SAVE) plan, a newer IDR option introduced during the Biden administration. However, the ruling's implications extended to all IDR plans, including IBR, due to their shared regulatory framework. As a result, the Department of Education paused forgiveness under IBR to comply with the court's order and to update its systems accordingly.
System Updates and Processing Delays
In its official statement, the Department of Education indicated that the pause in IBR forgiveness is necessary to "update our systems to accurately count months not affected by the court’s injunction." These updates are crucial for ensuring that borrowers' progress toward forgiveness is properly tracked and that any future discharges are processed correctly.
Impact on Borrowers
The suspension has left many borrowers in a state of uncertainty, particularly those who have been making payments under IBR for 20 to 25 years and were anticipating forgiveness. While the Department of Education has stated that forgiveness will resume once system updates are completed, no specific timeline has been provided, adding to borrowers' concerns.
What Borrowers Can Do
During this period, borrowers are advised to continue making their monthly payments to avoid default. Additionally, they should stay informed by regularly checking updates from the Department of Education and consult their loan servicers for guidance on managing their accounts. It is also recommended to keep records of all communications and payments made during this time.
6. What Can Borrowers Do While Forgiveness Is Paused?
The temporary suspension of student loan forgiveness under the Income-Based Repayment (IBR) plan has left many borrowers uncertain about their next steps. While the Department of Education updates its systems and legal challenges continue, here are some practical actions borrowers can take:
1. Continue Making Payments
Even though forgiveness is paused, it is important to keep making your monthly payments to avoid falling behind or going into default. Staying current helps protect your credit score and keeps your account in good standing.
2. Keep Records of Your Payments
Maintain detailed records of all payments made during this pause period. If you end up overpaying once forgiveness resumes, you may be entitled to refunds or account adjustments.
3. Request Temporary Forbearance if Needed
If making payments is difficult during this time, consider contacting your loan servicer to request a temporary forbearance. Be aware that interest may continue to accrue during forbearance, potentially increasing your total loan balance.
4. Stay Informed
Regularly check official updates from the U.S. Department of Education and trusted news sources. Policy changes and timelines for forgiveness resumption may evolve, and staying informed will help you prepare accordingly.
5. Consult Your Loan Servicer
Reach out to your loan servicer for personalized guidance. They can help you understand your options and manage your repayment plan during the pause.
6. Explore Alternative Repayment Options
Depending on your financial situation, other repayment plans or programs might be available to help ease your burden. Discuss alternatives with your servicer to find the best fit.
By taking these steps, borrowers can better navigate the uncertainty and protect their financial health while waiting for the resumption of student loan forgiveness under the IBR plan.
