8 Million Student Loan Borrowers Will Have No Payments For Most Of 2025, As Loan Forgiveness Remains Stalled

8 Million Student Loan Borrowers Will Have No Payments For Most Of 2025, As Loan Forgiveness Remains Stalled

TOPSHOT – (COMBO) This combination of pictures created on October 22, 2020 shows US President Donald … [+] Trump (L) and Democratic Presidential candidate and former US Vice President Joe Biden during the final presidential debate at Belmont University in Nashville, Tennessee, on October 22, 2020. (Photo by Brendan Smialowski and JIM WATSON / AFP) (Photo by BRENDAN SMIALOWSKIJIM WATSON/AFP via Getty Images)

AFP via Getty Images

The Education Department announced on Wednesday that several million student loan borrowers will likely have no payment obligations for most of 2025 as legal battles over the future of student loan forgiveness under certain repayment programs continue.

The new information was released as the SAVE plan, a key feature of the Biden administration’s student loan relief plans, remains blocked due to legal challenges. And student loan forgiveness under several other income-driven repayment plans is also currently enjoined. Meanwhile, President-elect Donald Trump is preparing to return to the White House next week, ushering in a new period of uncertainty for many borrowers.

Here’s what’s going on, and what borrowers should know for the coming months.

Millions Are Still In Forbearance As Student Loan Forgiveness And Reduced Payments Under The SAVE Plan Are Challenged

The Education Department’s announcement comes as a litigation continues over the future of several income-driven repayment, or IDR, plans.

IDR plans use a formula based on a borrower’s income and family size to determine their monthly payments. Under current federal law, those who enroll in IDR plans are entitled to student loan forgiveness of any remaining balance after 20 or 25 years in repayment, depending on the specific plan. Using longstanding legal authority provided by the Higher Education Act, the Biden administration launched a new IDR plan in 2023, called the SAVE plan. SAVE is designed to be far more affordable than older IDR options, with additional benefits including interest subsidies and faster student loan forgiveness for certain borrowers.

But months after the program debuted, a group of Republican-led states filed a legal challenge to stop it. In August, a federal appeals court sided with the states and issued an injunction blocking most elements of the SAVE plan including student loan forgiveness, lower payments, and interest subsidies. The court also ordered a halt to student loan forgiveness under two other IDR plans that were created using the same legal authority under the Higher Education Act — the ICR plan and the PAYE plan. The IBR plan, which was created separately by Congress, is not directly impacted.

Because the Biden administration was prohibited from implementing most features of the SAVE plan, more than eight million borrowers who had applied for, enrolled in, or switched to the program were placed into a forbearance. The forbearance has suspended all payments and halted interest accrual for covered borrowers while the litigation continues.

Education Department Expects SAVE Plan Forbearance To Continue Until At Least December 2025 While Loan Forgiveness Stays Blocked

In its announcement on Wednesday, the Education Department indicated that borrowers in the SAVE plan forbearance will not have to make any payments for most of 2025.

“You will be in this forbearance until servicers are able to accurately calculate monthly payments, which the Office of Federal Student Aid expects servicers to be able to do no earlier than September 2025,” said the department on the SAVE plan website. “Servicers expect to complete the necessary technical updates to be ready to begin moving borrowers back into repayment no earlier than September 2025. Because this transition will take time, servicers expect first payments to be due no earlier than December 2025.”

In addition, the department also indicated that annual income recertification deadlines for covered borrowers will be pushed out even further, to sometime in 2026. Typically, borrowers in IDR plans must recertify their income every year to have their IDR plan payments recalculated as they pursue student loan forgiveness.

“Because SAVE Plan borrowers will be in a general forbearance until the fall of 2025, ED is directing loan servicers to change IDR plan anniversary recertification deadlines,” continued the department. “The first recertification deadline for SAVE borrowers will be no earlier than Feb. 1, 2026. Recertification deadlines will occur on a rolling basis. Borrowers will receive information from their servicers on their specific recertification timeline. We encourage you to visit StudentAid.gov and provide consent for auto-recertification of your IDR plan if you are eligible. By doing so, we’ll automatically recertify your IDR plan by its recertification deadline. This will ensure you remain enrolled in SAVE.”

The department confirmed that student loan forgiveness remains blocked for the SAVE, ICR, and PAYE plans, but is open under the IBR plan.

Borrowers May Want To Change Plans To Pursue Student Loan Forgiveness Under IDR And PSLF

While having no payments for most of 2025 will be welcome news for borrowers covered by the SAVE plan actions, there is a cost: the time spent in the forbearance does not count toward student loan forgiveness under IDR or Public Service Loan Forgiveness, a separate but related program that can wipe out a borrower’s federal student loan debt in as little as 10 years.

During the forbearance, “you do not have to make your monthly payments on your student loans, interest is not accruing, and time spent does not provide credit toward Public Service Loan Forgiveness (PSLF) or IDR,” reiterated the department on Wednesday. While borrowers can make payments on their student loans during the forbearance, those payments will be applied to future bills — they will not count toward loan forgiveness.

Borrowers who want to leave the SAVE plan forbearance to resume progress toward student loan forgiveness for IDR or PSLF will need to change to a different qualifying IDR plan.

“Borrowers who do not want to be in this forbearance can contact their servicer to change repayment plans,” says the department. Given the long period of no payment obligations, the extended timeline will “give borrowers the opportunity to make another choice for repayment, based on which of the updated options is best for them.”

Earlier this month, the Education Department formally resumed processing applications for the ICR, PAYE, and IBR plans, although borrowers should expect lengthy delays. Borrowers should also be aware that while the ICR and PAYE plans were reopened in December, loan forgiveness as a feature of those plans remains blocked due to the 8th Circuit’s court order. Student loan forgiveness as a feature of the IBR plan is not blocked, however.

New Administration Brings Uncertainty About The Future Of Student Loan Forgiveness

With the Trump administration set to take over next week, the timelines outlined in this week’s Education Department announcement could potentially change. And so could borrowers’ options.

“Borrowers will be informed of any further change to this litigation-related forbearance,” noted the department.

House Republican leaders have called for significant student loan reforms to be included in an upcoming reconciliation bill, which would be able to pass the House and Senate via party-line votes with a simply majority. It is not quite clear yet what may be included in this as-yet drafted bill, but it could include a repeal of time-based student loan forgiveness under IDR plans. Borrowers are also awaiting a ruling from the 8th Circuit Court of Appeals, which could ultimately determine the fate of student loan forgiveness under the ICR, PAYE, and SAVE plans.

Read More

Zaļā Josta - Reklāma