U.S. government halts student loan forgiveness under IBR

The Department of Education has stopped processing student loan forgiveness under the Income-Based Repayment plan (IBR) leaving thousands of borrowers in limbo.

The IBR plan is one of the several income-driven repayment plan programs offered to borrowers and is the only current plan not subjected to any legal challenge or court injunction.

What’s happening?

The Department of Education claims it needs to “update its system” before it can start forgiving loans again. In simple terms, it means:

• Borrowers who have already made 20 or 25 years of payments won’t get relief yet
• The pause will not be implemented on all repayments but only the one involving IBR as it is not blocked by lawsuits.
• The government hasn’t declared any statement regarding restart of the forgiveness.

Why did it happen?

Last year, the Republican-led filed lawsuits to stop Biden’s Saving on a Valuable Education (SAVE) plan. As a result, courts blocked SAVE but IBR was introduced by Congress years ago and was not mentioned in that lawsuit.

“Forgiveness as a feature of the SAVE, PAYE, and ICR Plans is currently paused, because those plans were not created by Congress,” said the department.

“Generally, ED can and will still process loan forgiveness for the IBR Plan, which was separately enacted by Congress,” the department added.

Yet, the Department of Education has stopped IBR forgiveness anyway, blaming “system updates” linked to the SAVE case.

What can borrowers do?

The beneficiaries of the IBR forgiveness have two options to proceed further:

• Keep paying: you will get refunded for the extra payments once forgiveness resumes
• Request a pause (forbearance) 

Bigger problems in student loans

Due to this suspension, massive delays will be added in the student loan system:

• Backlog of 1.5 million applications for income-driven plans
• Interests recommence in August for millions in the SAVE plan
• Further changes are coming soon under a law signed by President Trump

What’s next?

There is no clear timeline for the government to fix this leaving borrowers who qualified for forgiveness stranded.