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The Department of Education has released several major updates regarding the processing of income-driven repayment (IDR) plan requests submitted by federal student loan borrowers, highlighting changes in plan processing, expected timelines, and implications for borrowers.
The Department of Education has indicated that payments under the SAVE plan are unlikely to resume anytime soon and the program may ultimately be struck down. Borrowers enrolled in the SAVE plan are currently in a forbearance with no payments due and no interest accruing, but time spent in this period will not count toward student loan forgiveness or Public Service Loan Forgiveness (PSLF). The duration of this forbearance remains unclear.
Processing for income-driven repayment plans ICR, IBR, and PAYE has begun to resume for some borrowers. The Department of Education has directed loan servicers to start placing borrowers into these plans as soon as possible. According to MOHELA, a contracted loan servicer, applications from single filers or married borrowers with no income are being processed, while others remain on hold.
The Department of Education expects full resumption of processing for all IDR plans, including ICR, IBR, and PAYE, by May 10, 2025. This includes borrowers in SAVE forbearance who have applied to switch to other IDR plans. However, significant delays are anticipated due to application backlogs and required system updates by servicers.
A major update is the planned inclusion of spousal income for payment calculations under ICR, IBR, and PAYE plans, regardless of the borrower's marital tax filing status. While this is said to comply with a recent federal appeals court order, it conflicts with federal statute for married borrowers who file taxes separately. This change could cause substantial payment increases and potential legal challenges. An amended declaration from the Department of Education later clarified that spousal income would not be factored in for married borrowers filing separately, yet the spouse will still be counted in family size.
Borrowers applying for IDR plans will be placed in a processing forbearance for up to 60 days or until their application is processed. Time spent in processing forbearance counts toward PSLF eligibility but not toward forgiveness based on IDR plans. If applications remain unprocessed after 60 days, borrowers move into a general forbearance period which does not count towards forgiveness under IDR or PSLF.
Borrowers pursuing student loan forgiveness via PSLF may use the PSLF Buyback program to count certain non-qualifying forbearance periods (including SAVE plan and general forbearance) toward forgiveness, but only if they have at least 120 months of qualifying employment. The program has specific eligibility requirements and many borrowers remain awaiting Department of Education decisions on their buyback applications.