Latest news with #Income-ContingentRepayment
Yahoo
27-03-2025
- Business
- Yahoo
Trump administration reopens online applications for income-driven student loan repayment
March 27 (UPI) -- The Department of Education has reopened online applications for a student loan repayment program used by millions of people, it announced Thursday. Earlier this year, the Trump administration ended the online application process for the Income Driven Repayment plan, which allows borrowers to repay their student loans based on how much money they make, citing a court order. That prompted complaints from borrowers and their advocates. The plan joins Pay as you Earn and Income-Contingent Repayment as options for student loan repayment. The Saving on a Valuable Education, or SAVE plan, a component of the income-driven plan, was initiated by the Biden administration. The Trump administration ended the program based on a ruling by the 8th Circuit Court of Appeals. The American Federation of Teachers sued the administration, arguing it interpreted the ruling too broadly when it stopped accepting online applications for that portion of the SAVE plan. The SAVE plan itself remains blocked in court.
Yahoo
26-03-2025
- Business
- Yahoo
Education Department restarts online borrowing applications
March 26 (UPI) -- The U.S. Department of Education reopened its online income-driven repayment plan and loan consolidation applications for borrowers Wednesday. In a press release, the agency said its Office of Federal Student Aid can once again receive applications from borrowers for the Income-Based Repayment, Pay As You Earn and Income-Contingent Repayment plans using which has been reportedly updated. The application was paused by an injunction in February due to a lawsuit filed by the Trump administration. However, the American Federation of Teachers filed a suit on March 18 to restart the application, stating in a press release that the Trump administration was "denying borrowers' access to affordable loan payments and blocking progress towards Public Service Loan Forgiveness," in what it alleged is a "violation of federal law." It declared in its lawsuit that "Congress provided clear and specific directives to the Department so that millions of Americans could repay their loans without being hindered by the debt." Acting Education Department Under Secretary James Bergeron said in the release, "Our team was able to relaunch this application within weeks, ensuring borrowers have access and the ability to access all legal repayment plans."
Axios
21-03-2025
- Business
- Axios
What dismantling Education Department means for student loans
President Trump signed an executive order to close down the Department of Education on Thursday — an unprecedented move that presents big questions for student loan borrowers. Why it matters: The department plays a key role in managing some $1.5 trillion in student debt for more than 40 million borrowers, and a vast majority of its budget is allocated to the agency that oversees the federal student loan system. Even before abolishing the department, the Trump administration blocked student loan forgiveness and repayment plans, slashed department staffing and wiped the federal watchdog agency tasked with overseeing student loan servicing and collections. Yes, but: A move to completely abolish the Education Department will likely face legal opposition because eliminating a federal department requires an act of Congress. However, the administration can cut key funding in the meantime. State of play: If the department is shuttered, duties including managing federal student aid responsibilities, would need to be shifted to another agency. "The Department of Education is not a bank, and it must return bank functions to an entity equipped to serve America's students," the executive order says. Although it's not immediately clear which entity would take over, proposals include transferring student loans to agencies like the Treasury, the IRS, or potentially even to the states. During the transition, there could be slower processing times for loans, applications and payments and the potential for more administrative errors. While it's possible there could be a pause in borrowers' payments for a period, they would still eventually be due. What they're saying: Betsy Mayotte, president of The Institute of Student Loan Advisors, told Axios before Trump's order she wouldn't be surprised if that transition period doesn't affect borrowers too much. "I wouldn't be surprised even if they kept the same servicers that they have contracts with already to manage the loan," Mayotte said. Zoom in: Pell grants, subsidized loans and work-study grants are mostly congressionally appropriated and, while the Education Department manages them, it would take an act of Congress to get rid of them. So if the department shutters, these too would need to be managed by a different agency but wouldn't necessarily go away. Other income-driven repayment plans, like Public Service Loan Forgiveness (PSLF) and Income-Contingent Repayment, would also be difficult to remove because they require an act of Congress. But the administration in recent weeks made changes to repayment plans, including halting access to income-driven repayment plans. And amid ongoing legal challenges, borrowers are now unable to pursue PSLF. The SAVE plan, meanwhile, which was implemented by the Biden administration as an income-driven student loan repayment plan, was already in legal jeopardy and faces an uncertain future. Zoom out: If federal student borrowing is put in jeopardy, some may turn to private loans. While private loans aren't necessarily more expensive, they're similar to applying for a personal loan or mortgage in that credit score, debt and income will determine the interest rate a borrower is offered and whether they qualify, NerdWallet's lending expert Kate Wood told Axios before the executive order was issued. With federal loans, the interest rate is determined by the year the loan originated and characteristics of the borrower don't matter. Everyone gets the same terms. There are no student debt forgiveness programs with private loans, and income-based repayment options are not guaranteed. Between the lines: "It's possible some borrowers would simply decide they can't afford college or don't want to deal with borrowing," Wood said. "With federal student loans, access is easy. All you need to do for consideration is file the FAFSA," she explained. "With private loans, you need to find the lenders, complete the applications, compare the terms — all the work is put onto the borrower." To borrow the full amount needed, a borrower may need to work with multiple private lenders, Wood noted. The bottom line: There is a lot of uncertainty about what's going to happen. "If you're a current federal borrower and you're concerned, the best proactive step is to save your information," Wood advised. Go to and screenshot or download your repayment history, if you're on an income-drive repayment plan or PSLF and your progress toward forgiveness, she added.
Boston Globe
01-03-2025
- Business
- Boston Globe
Student loan borrowers blocked from affordable repayment plans
The SAVE plan has been in legal limbo ever since, and participants' payments have been on hold since last summer. But last week, applications to the three other income-driven plans were also taken down -- older programs that hadn't been subject to any litigation. That effectively shut the door to more affordable plans for borrowers in financial distress, and eliminated a crucial component needed to participate in the Public Service Loan Forgiveness program -- at least temporarily. Get Starting Point A guide through the most important stories of the morning, delivered Monday through Friday. Enter Email Sign Up "The department is reviewing repayment applications to conform with the 8th Circuit's ruling," a spokesperson for the Education Department said Thursday, adding that it updated information for borrowers on including on a page about court actions related to SAVE. Advertisement Here's what we know now: What just happened? The 8th Circuit upheld a temporary ban on a portion of the SAVE plan issued by the U.S. District Court for the Eastern District of Missouri. The appeals court sent the case back to the district court with instructions to expand the preliminary injunction to the entire SAVE rule (although other legal rulings had already temporarily suspended the program). But the appellate court didn't stop there: The judges also said the Education Department secretary lacks the explicit authority to grant loan forgiveness in any Income-Contingent Repayment plans, even though it has been done for more than three decades. (Borrowers make monthly payments equal to a percentage of their discretionary income, which varies across income-driven plans. But after a set number of years, usually 20 to 25, any remaining balance is canceled.) Advertisement "This is a radical departure from how this statute has been interpreted and administered for nearly 30 years," said Michele Zampini, senior director of college affordability at the Institute for College Access and Success, a research and advocacy group. The Education Department posted a banner on its website that said the injunction prevents it from administering SAVE and parts of other income-driven plans -- and, as a result, applications for those plans and online loan consolidations were unavailable. It is important to remember that the decision is not final and that litigation is continuing, said Abby Shafroth, director of the National Consumer Law Center's Student Loan Borrower Assistance Project. "But the decision is very worrying for borrowers who depend on the SAVE plan to manage their payments and work toward being debt free," she said. What's likely to happen next? Scott Buchanan, executive director of the Student Loan Servicing Alliance, an industry group, said he would expect that applications for at least one of the income-driven plans, known as income-based repayment, will become available again "as soon as practical." The reasons are complicated: That's because the income-based repayment plan was created as part of a July 2009 law, which explicitly permits loan cancellation at the end of the repayment term, whereas SAVE was a regulation established by the department using authority established under a 1993 law. The states that initially brought the lawsuit argued that loan cancellation wasn't explicitly permitted under the 1993 law, and the appellate court sided with that interpretation. But the department has relied on that authority to create three other income-driven programs, all before SAVE, each of which incrementally improved on the plans before it. They were Income-Contingent Repayment, introduced in 1994; Pay As You Earn (PAYE), introduced in 2012; and Revised Pay As You Earn (REPAYE), which became available in 2015 and was replaced by SAVE. Advertisement Are income-driven loan applications being processed now? No, all applications have been temporarily halted, according to Buchanan. He said the servicers have received instructions to stop processing the income-driven and loan-consolidation applications for three months, but he expected they will receive additional guidance in the coming weeks. Monthly payments are still being collected on the other existing income-driven plans (Income-Based Repayment, Pay As You Earn and Income-Contingent Repayment) while SAVE borrowers remain in an interest-free forbearance while the litigation continues. Is the Public Service Loan Forgiveness program still available? Yes, it is still open to government and nonprofit employees such as public schoolteachers, librarians and public defenders. After 120 qualifying payments are made, any remaining balance is wiped out. But there is one major obstruction: Most borrowers need to be enrolled in an income-driven repayment plan to be eligible for loan cancellation, and it's not possible to apply to any of those plans right now. If you're already in a qualifying repayment plan, however, and you become newly eligible for the public service program (because of a new job, for example), you can still enroll. But if you're in the SAVE plan, where payments have been halted because of the ongoing litigation, your qualifying payments have also been put on hold -- and you can't make any progress toward forgiveness. The public service program, which President George W. Bush signed into law in 2007, is not at risk right now, and student-loan experts say there isn't a broad appetite dismantle the popular program, which would require Congress to pass a bill. Advertisement What if I'm close to making all of my payments in the public service program, but I am stuck in the SAVE plan? More than 2 million people are enrolled in the public service program and hundreds of thousands of them are approaching the finish line: About 21,700 borrowers have made enough payments to qualify for cancellation, while 330,100 had made 97 to 119 qualifying payments as of Dec. 31, according to data from the Education Department's Federal Student Aid office. Borrowers who are enrolled in the SAVE plan and have nearly enough qualifying payments have few good options. "Borrowers stuck in SAVE can either wait for the IDR applications to open back up and switch to another IDR plan," said Betsy Mayotte, president of the Institute of Student Loan Advisors, a group that provides free guidance to borrowers. "Or ride out the SAVE forbearance and plan on using what's called 'buyback' to get credit for those months once they have certified 120 months of eligible employment." What are my options if I can't afford payments (because I lost my job or some other reason)? There are other options besides income-driven repayment plans that can generally be requested through your loan servicer or the company that manages your payments. Borrowers can temporarily pause payments through deferments or forbearance, but those programs have different eligibility requirements and consequences, largely because of the way interest is treated. "Borrowers can receive deferments for things such as economic hardship or being unemployed," said Mayotte. "Forbearances are generally applied in cases of less specific financial hardship." Advertisement There are other repayment plans that can lower your monthly obligation: graduated repayment, where payments start lower and rise over time, and extended repayment, which lowers the monthly payment by lengthening the loan term. Simply consolidating your loans can also lower your monthly payments by extending the repayment period, but there are drawbacks. You may have a higher interest rate on all of your debt, and you'll end up paying more overall. Will I be penalized if I cannot recertify my loans? Each year, borrowers enrolled in income-driven repayment plans must recertify their income or face negative consequences, including being kicked out of the repayment plan. But those applications are also not available right now. For now, it's not something you need to worry about, Buchanan said. The loan servicers have been instructed to push back those deadlines on a month-by-month basis, and they will be in touch with borrowers when they receive more clarity from the Education Department. This article originally appeared in
