Trump administration pauses student loan forgiveness

Without much notice, the Education Department has suspended student loan forgiveness under a long-standing repayment plan, offering no timeline for resumption and little explanation for the decision.

Income-Based Repayment is one of four federal plans that tie monthly payments to earnings and family size with the promise of loan forgiveness after 20 or 25 years of payments. It is the only income-driven plan that is not affected by a court injunction and, therefore, the only one still processing loan forgiveness, according to the department. About 2 million borrowers are enrolled in the plan.

But in an FAQ updated earlier this month, the department said: “IBR forgiveness is paused while our systems are updated to accurately count months not affected by the court’s injunction. IBR forgiveness will resume once those updates are completed.”

The Education Department did not immediately respond to questions about the timeline or updates.

Several student loan servicers — the companies contracted by the department to collect loan payments — said they have yet to receive any guidance on the suspension. Some noted the department has not asked them to process loan forgiveness for any borrowers since mid-January.

The department stopped discharging debts under the other three income-driven plans — Income-Contingent Repayment, Pay As You Earn and Saving on a Valuable Education — after an appeals court upheld and expanded a temporary suspension of Save. That Biden-era plan, which offers lower payments and a faster path to loan forgiveness, has been on hold since last summer, when the courts sided with a group of Republican-led states challenging its legality.

The states argued that loan forgiveness was not authorized in the 1993 statute that President Joe Biden used to create Save. Because that same statute spawned ICR and PAYE, the courts also questioned the legality of the forgiveness feature in those plans, even though they’ve been around for decades.

IBR, which was created in 2007, was spared from the lawsuits because Congress explicitly allowed loan forgiveness at the end of the repayment term.

Because IBR is not subject to the confusing network of court battles involving student loans, the Education Department has been encouraging borrowers interested in loan forgiveness to sign up for the plan, especially the 7.7 million who are enrolled in Save.

Starting Aug. 1, interest will resume accruing on loans in the Save program, even though enrollees’ payments remain paused by the court injunction. Although the litigation is unresolved, the tax law that President Donald Trump signed this month ends Save and gives enrollees until 2028 to leave the plan.

The pending interest accrual and the demise of Save mean IBR could see an influx of borrowers. If the suspension of loan forgiveness is not resolved quickly, those borrowers could be trapped in another plan without a clear path to forgiveness.