Despite a Department of Education update, over 1 million student loan borrowers face massive … More
Massive Student Loan And Income-Driven Repayment Plan Processing Uncertainty Remains
The good news for student loan borrowers is that they can once again submit applications for income-driven repayment plans, student loan forgiveness, and federal loan consolidation. Additionally, a recent update from a Department of Education court filing provided a general timeline for when student loan servicers will resume processing applications. However, despite this update, significant uncertainty persists about when applications will actually be processed and many other essential details that student loan borrowers are eagerly awaiting.
Advocates warn that borrowers remain in limbo, unsure how long they’ll wait or the outcome of their repayment plans and forgiveness programs. “With this chaos, and with the uncertainty about which [repayment] plans are available and whether or not they can get onto these plans, a lot of people are delaying very real-life choices,” Persis Yu, deputy executive director, and managing counsel at the Student Borrower Protection Center told me in an interview.
Yu’s organization and the American Federation of Teachers are suing the Education Department to push for faster action and for more data on the Education Department’s expected timelines (the Education Department did not respond to an e-mail seeking an interview or comment). Despite the recent court-driven update, borrowers still face a confusing and fluid situation regarding student loan forgiveness and income-driven repayment plan processing.
Student Loan Forgiveness Processing Update: What We Do Know
In late March 2025, the Education Department reopened online applications for all IDR plans (and Direct loan consolidation) after a month-long suspension. The reopening was prompted by pressure from advocates and a lawsuit filed by the AFT, which argued the Department broke federal law by denying borrowers access to student loan forgiveness, IDR plans, and Public Service Loan Forgiveness during the pause.
The Department’s recent update, filed in federal court, outlines a timeline for resuming processing of IDR and PSLF-related applications:
- Partial Processing Resumes: According to the Department’s court filing, loan servicers have already resumed processing specific IDR requests “for IBR, PAYE, and ICR applications for borrowers who file taxes as single or married with no income.” All other IDR applications remain on hold pending system updates. This caveat relates to technical adjustments a court ruling requires, specifically, how spousal income is treated for married borrowers in IDR calculations.
- Complete Processing Resumption Timeline: According to the Education Department, by May 10, 2025, federal loan servicers are expected to resume processing all new IDR plan applications, including moving borrowers who had applied for the now-unavailable SAVE plan into one of the existing IDR plans they qualify for. This target date is the first concrete timeline borrowers have been given.
- Temporary Forbearance: To prevent immediate harm, the Department instructed servicers to place affected borrowers into a special processing forbearance status for up to 60 days while their IDR applications are pending. This temporary forbearance ensures borrowers won’t be required to make unaffordable payments in the short term (although interest may still accrue in some cases). Notably, the Department confirmed that time spent in this processing forbearance will count toward PSLF for eligible public service workers. However, it will not count toward the 20- or 25-year forgiveness timeline under IDR plans. If an application remains unprocessed for over 60 days, the borrower could be moved into a regular administrative forbearance, which counts toward neither PSLF nor IDR forgiveness.
The upshot of the Department’s update is that relief is coming, but not immediately.
Student Loan Borrowers Still Face Tremendous Uncertainty
Myriad important open questions remain that were not addressed in the Department of Education’s update. Among the most salient:
How Big Is The Student Loan Payment Plan Application Backlog And How Long Will It Take For Servicers To Catch Up?
Borrower advocates, including Yu, stress that despite the Department of Education’s announced plans, significant uncertainty prevails over those awaiting IDR plan approvals. Officials have not fully confirmed the exact size of the backlog or the specific timeframe for clearing it. The Education Department acknowledged that “more than 1 million people” have sought lower payments, but will those applications take weeks to process? Months? Years? The agency has not estimated how quickly servicers can work through the queue. As Yu noted in our interview, a substantial portion of the 1 million application backlog predates the processing freeze, which means that the current figure is likely much higher.
In court, officials suggested a mid-May restart for processing; however, even once processing resumes, working through the backlog will take time and new requests will likely come in daily now that the online portal is back. It’s unclear if servicers have added capacity or staff to handle the surge. All this means borrowers could be waiting well into the summer (or much longer) before seeing their IDR plans are finalized and their monthly payment amounts are reduced.
What Happens To Student Loan Borrowers After The 60-Day Processing Forbearance Period?
To prevent immediate harm, the Education Department gives borrowers who apply for an IDR plan an automatic processing forbearance and a temporary pause on payments for up to 60 days while the application is pending. During this 60-day processing forbearance, borrowers are not required to make payments, and importantly, those two months will count toward loan forgiveness programs like Public Service Loan Forgiveness and IDR cancellation. However, this safety net has a time limit. If an application isn’t processed within 60 days, the borrower’s loan is moved into a general forbearance, and this time does not count toward PSLF or IDR forgiveness.
This raises a critical unknown: Will the Education Department ensure that long processing delays don’t cost borrowers forgiveness credit? If the backlog pushes someone beyond 60 days, they stand to lose credit for additional months of waiting. For a borrower working toward 120 qualifying payments for PSLF, for example, a three-month processing delay would mean three months added to the back end of their journey to forgiveness. It remains to be seen if officials might extend the counting period or find another remedy if the backlog persists beyond the initial 60-day window. Currently, borrowers face the prospect of entering a no-credit limbo after two months, even though the holdup is entirely out of their control.
What Happens To Student Loan Borrowers Who Chose SAVE Or The ‘Lowest Payment’ Option On Applications Submitted Before The Freeze?
Another murky area is the fate of borrowers who submitted IDR applications before the form was taken down and revised. On the old form (before March 26), borrowers could select the SAVE plan or ask for a plan labeled: “lowest monthly payment.” Those options have since been removed due to the court order. But tens of thousands of borrowers had already sent in applications choosing SAVE or the lowest-payment option during the months it was available. What will happen to those requests? Will applications be automatically switched to another IDR plan? Will those borrowers be required to reapply under the new system, which could further delay the timeline? The Education Department hasn’t provided a clear answer yet.
The Upshot For Student Loan Borrowers
The uncertainty over student loan repayment plan processing and the ability to enter into an IDR plan is fueling a lot of confusion and anxiety, Yu emphasized. Borrowers who did everything right are now hearing nothing. Some are unsure if their application is still valid. Others fear they’ll have to start over and potentially lose more time. “It’s deeply confusing for borrowers,” Yu said in our interview, and “leaves these folks stuck waiting for clarity on whether they’ll be automatically placed into a different IDR plan or prompted to take additional steps.” Until officials provide more clarity, borrowers are left guessing and hoping their original applications won’t be lost. Ultimately, while the recent Department of Education update is a step in the right direction, massive uncertainty remains.