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Many student loan borrowers are hitting a wall in repayments, with the U.S. Department of Education denying applications to switch to new repayment plans.
In August alone, the department denied 327,955 borrowers’ applications to enroll in income-based repayment plans, according to a Dec. 15 court filing.
This denial means many of these borrowers may be stuck with their previous repayment plans, resulting in higher monthly payments or remaining deferred from accruing interest. As of the end of November, a further 802,730 IDR planning applications were pending with the Department of Education.
Millions of student loan holders rely on IDR plans to help them afford their payments and ultimately get out of debt. The plan would limit a borrower’s monthly bills to a percentage of their discretionary income and erase the debt after a set period of time (usually 20 or 25 years). People who take advantage of the popular Public Service Loan Forgiveness Program, which allows public service loans to be forgiven after 10 years, also typically need to enroll in an IDR plan.
Consumer advocacy groups said they were alarmed by the number of refusals.
“This could result in further delays, such as missing out on months eligible for public service loan forgiveness or IDR cancellation, and many of these borrowers will end up paying higher amounts each month,” said Persis Yu, deputy executive director and managing counselor at Protect Borrowers.
More than 42 million Americans have student loans, totaling more than $1.6 trillion in debt.
The Ministry of Education did not respond to requests for comment.
As part of a settlement between the American Federation of Teachers and the Trump administration, the Department of Education is being asked to submit a progress report on the backlog of hundreds of thousands of IDR plan applications from student loan borrowers.
The teachers union, which represents about 2 million members, filed a lawsuit in March against the administration, accusing it of disenfranchising student loan borrowers. Protect Borrowers served as AFT’s legal advisor.
Here’s what you need to know about recent IDR plan application denials and what to do next if it happens to you.
Why some IDR applications are rejected
The Department of Education said in a court filing that it had rejected hundreds of thousands of IDR applications because there was “unanticipated ambiguity” about which repayment plan a borrower should enter.
These federal student loan holders sought to participate in the plan with the “lowest monthly payments,” according to the filing. But Trump officials said the two plans would have the same monthly bill.
“In response, the ED has chosen to procedurally deny such application,” the agency said in court documents.
Yu said the Trump administration’s reasoning does not follow established guidelines.
“In the IDR application, we anticipated two possible repayment plans with equal payment amounts and provided a plan for such cases,” Yu said. In such situations, there is a ranking of IDR plans for the Ministry of Education to follow, she added.
Higher education expert Mark Kantrowitz also said he had doubts about Trump officials’ explanation.
“The U.S. Department of Education’s justification for denying these borrowers is weak,” Kantrowitz said.
What Borrowers Should Do Next
Difficulty accessing affordable student loan repayment plans is already a trying time for borrowers. More than 5 million student loan holders are currently in default, and that total could soon rise to around 10 million, the Department of Education announced earlier this year.
The Department of Education confirmed to CNBC on Tuesday that it will begin garnishing wages for borrowers who have defaulted on their student loans starting in early January.
The U.S. Department of Education’s justification for denying these borrowers is weak.
mark kantrowitz
higher education experts
If your application for an IDR plan is denied, please submit a new application as soon as possible, Kantrowitz said.
Kantrowitz said borrowers should choose a specific plan when applying, “in part because borrowers need to make an informed decision, and also because of recent denials related to ambiguity about the plan with the lowest monthly payment.”
The Biden administration’s Savings for Valuable Education (SAVE) plan is now obsolete after a court blocked the program. And President Donald Trump’s “Big, Beautiful Bill” would phase out several other IDR programs.
As a result, the best option for many borrowers right now is an income-based repayment plan (IBR), Kantrowitz said. Under the terms of IBR, borrowers will pay 10% of their discretionary income each month, but that percentage increases to 15% for certain borrowers with older loans.
There are several tools available online that can help you see how much your monthly bill will be on different plans.
Requests for IDR plans can be submitted at StudentAid.gov.
