Applications for All Income-Driven Repayment Plans Suspended

The Department of Education suspended applications for enrollment in all income-driven repayments (IDR) plans, including Income–Based Repayment and online loan consolidation applications. The Department’s action came in response to the recent decision by the Court of Appeals for the Eighth Circuit that affirmed and expanded an earlier partial injunction of the Saving on a Valuable Education (SAVE) IDR plan.

While the Eighth Circuit’s decision affected only the SAVE plan and its predecessor, the Revised Pay As You Earn (REPAYE) plan, which was revived when SAVE was originally enjoined, the court’s reasoning for its decision asserted that the 1993 statute that undergirds income-contingent repayment (ICR) did not explicitly allow for loan forgiveness. Thus, because SAVE and REPAYE are both based on the ICR statutory language, the court determined any forgiveness under these plans is beyond the Secretary’s authority.

The Department has not provided an explanation for blocking enrollment in Income-Based Repayment, which was specifically excluded from the court’s decision due to the codified language it contains allowing forgiveness.

The impact of these changes on currently enrolled borrowers is unclear, though particular concern has arisen for borrowers enrolled in the Public Service Loan Forgiveness program, which relies on IDR plans for lower monthly payments, and in IDR plans who will soon need to recertify their income. If these borrowers are removed from IDR plans and placed back into standard repayment plans, their monthly payments would increase dramatically.

For more information, please contact:
Justin Monk