Student loan IDR plans: What could happen under federal budget proposals
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LOS ANGELES - Millions of federal student loan borrowers may soon face higher monthly payments as courts and Congress move to overhaul repayment plans, Forbes and The Hill reported.
The backstory:
The 8th U.S. Circuit Court of Appeals issued a ruling last week that blocks the Saving on Valuable Education (SAVE) plan, a Biden-era income-driven repayment (IDR) plan that offered lower monthly payments and faster loan forgiveness for certain borrowers.
The ruling also temporarily halted loan forgiveness under the Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans, signaling that forgiveness under these plans could be permanently struck down.
At the same time, House Republicans are pushing for major changes to student loan repayment programs as part of budget reconciliation talks. Their proposals include:
- Eliminating the SAVE plan and reducing IDR options for future borrowers.
- Repealing student loan forgiveness under ICR and PAYE.
- Ending PSLF loan forgiveness for public workers or restricting eligibility.
- Replacing current IDR plans with a new version that does not offer loan forgiveness after 20-25 years.
How could borrowers be affected?
If these plans are repealed or struck down, borrowers may be forced into more expensive repayment plans, according to The Institute for College Access & Success (TICAS).
FILE - Student debt relief activists participate in a rally at the U.S. Supreme Court on June 30, 2023 in Washington, DC. (Photo by Kevin Dietsch/Getty Images)
- At least 8 million borrowers are enrolled in the SAVE plan, according to Forbes. If the program is eliminated, they will have to switch to a different IDR plan with higher monthly payments.
- Under House Republicans’ proposal, the average borrower could pay nearly $200 more per month, according to TICAS.
- Borrowers earning $30,000 per year could see payments jump to $54 per month, while those making $100,000 per year could see payments quadruple from $270 to nearly $1,000 per month.
- Parent PLUS borrowers could be hit hardest, as ICR is the only IDR option available for them. If ICR forgiveness is removed, these borrowers may have no other repayment options.
What’s next for student loan forgiveness?
What you can do:
Congress is expected to finalize the budget in March, and any student loan changes will depend on negotiations between the House and Senate.
For now, experts advise borrowers to:
- Track their payments and keep records on studentaid.gov in case of policy changes.
- Consider switching to the Income-Based Repayment (IBR) plan, which is not currently under legal challenge.
- Stay informed and advocate by contacting their representatives about proposed student loan changes.
The Source: The details in this report are based on analyses and reporting from The Hill and Forbes, as well as policy proposals outlined by the House Budget Committee and court rulings from the 8th Circuit Court of Appeals. Additional context comes from research conducted by The Institute for College Access & Success (TICAS), the Student Borrower Protection Center, and statements from policymakers involved in ongoing budget negotiations.