During the Biden administration, ED used the regulatory process to introduce a more generous income-driven repayment (IDR) plan known as SAVE. The plan was challenged in court after nearly 8 million borrowers had already enrolled. Those borrowers have been placed into forbearance while the case is litigated. In the meantime, many Public Service Loan Forgiveness (PSLF) eligible borrowers currently on SAVE cannot make qualifying payments. This August, ED started charging interest on those loans, urging borrowers to enroll in other repayment plans and resume payments. In a lawsuit, the American Federation of Teachers objected to the administration’s handling of IDR and PSLF. In a settlement, ED agreed to open additional IDR plans to new enrollment, resume processing IDR forgiveness applications, and process PSLF waiver applications. However, progress has been slow. A proposed legal settlement would end SAVE, but the settlement is not final, and borrowers continue to face confusing and unclear options for repayment.
Transitioning borrowers to new plans once SAVE is eliminated will take time and staff support. Federal Student Aid (FSA), the agency that manages the student loan program, has long been considered understaffed to handle the loan program. Its recent cuts raise questions about ED’s ability to execute the transition effectively. Indeed, there is reason for concern about FSA’s capacity. The Department recently missed a court-imposed deadline requiring the adjudication of about 200,000 Borrower Defense to Repayment forgiveness applications and requested an 18-month extension because FSA has “seen staffing dwindle at the time when resources for postclass adjudication are most needed.” In addition, the backlog of IDR applications remains large and the number of unprocessed PSLF waiver applications has grown.
The Department has twice announced plans to restart involuntary collections on defaulted loans but subsequently backed off. Most recently, ED indicated they wanted to give borrowers in default more time to rehabilitate their loans or enroll in new options that will become available as a result of OBBBA before withholding tax refunds. Work is underway on the implementing regulations that will overhaul the student loan program, but many borrowers remain in limbo until those regulations are finalized.
In October, the Department adopted a rule amending the definition of “qualifying employer” for PSLF to exclude organizations that, according to the Secretary, are engaged in “substantial illegal activities.” These provisions appear targeted at governments’ and non-profit organizations’ actions related to immigration, abortion care, gender-affirming care, or DEI programs.1 The rule, which is not scheduled to go into effect until July 2026, is the subject of multiple lawsuits, so it remains to be seen if any borrowers will be denied PSLF credit under this policy.
