*This post was taken from the National Association of Student Financial Aid Administrators (NASFAA) newsletter:
The Department of Education (ED), in an updated banner announcement on StudentAid.gov, has indicated that it has taken down the applications for income-driven repayment (IDR) plans and loan consolidation due to an injunction that continues to block the implementation of the Saving on a Valuable Education (SAVE) repayment plan.
According to ED, the injunction issued on February 18 prevents the department from implementing any provision of the SAVE plan, including its monthly payment formula, as well as processing time-based loan forgiveness for the SAVE, Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) plans. In response, the department has disabled its online application for all the IDR plans — SAVE, PAYE, ICR, and Income-Based Repayment (IBR) — as they all exist on the same form.
The injunction specifically focused on the forgiveness provisions within IDR plans and said “we conclude the entire SAVE Rule must be preliminarily enjoined.” Further the court argued that the lower courts mistakenly determined that the programs could function without forgiveness.
“Here, the district court enjoined only the forgiveness provision after concluding the remainder of the rule ‘can function sensibly’ without forgiveness. We conclude otherwise,” the ruling reads. “As the federal officials themselves argue, ‘it would make little sense for an ICR plan to end in default,’ which is what will happen for most borrowers enrolled in SAVE if forgiveness is enjoined while other provisions like the payment provisions remain in effect.”
“We will continue to update StudentAid.gov/saveaction with more information,” Federal Student Aid (FSA) noted in its announcement.
What We Know
The removal of these applications impacts both borrowers newly entering repayment and seeking an income-driven repayment plan, and borrowers already in repayment who would like to switch into an IDR repayment plan. It also impacts those seeking loan consolidation, since the consolidation application is embedded in the IDR online application.
What We Don’t Know
It’s unclear how long the applications will be unavailable to borrowers and whether pending applications will be affected. In their SAVE Plan FAQs, ED has said that when a borrower submits a repayment plan application, they will be placed into a 60-day interest-accruing processing forbearance period while their application is being processed. If after those 60 days ED has still not completed processing their application, they would then be placed into an interest-free general forbearance.
What This Means for Borrowers
Borrowers seeking to enroll in an income-driven repayment plan, including those borrowers seeking to move out of the SAVE plan into another income-driven repayment plan, will face significant delays trying to navigate the process. While the online applications are down for an indeterminate amount of days, borrowers still have the option to complete the paper application, which would include manually certifying their income by submitting documentation or giving consent for the department to use the IRS transfer process on their behalf. ED was already experiencing application processing delays prior to the online application being taken down which may lead to greater backlog and delays.
NASFAA is encouraging ED to provide more guidance on the status of the repayment plans so borrowers can clearly assess their repayment options.