WASHINGTON (TNND) — The Department of Education (ED) has paused forgiveness of student loans taken out under one of its plans.
A webpage of Federal Student Aid, one of the department’s offices, that was last updated July 9 includes a statement explaining how forgiveness under the Income-Based Repayment Plan (IBR) is stopped to allow ED’s systems to update following a court order.
“Currently, IBR forgiveness is paused while our systems are updated to accurately count months not affected by the court’s injunction,” Federal Student Aid says. “IBR forgiveness will resume once those updates are completed.”
The U.S. Court of Appeals for the Eighth Circuit in February affirmed a district court’s ruling that the ED secretary can’t redesign the Income-Contingent Repayment Plan (ICR), which has a different structure than IBR, to largely forgive loans. Seven states had sued the Trump administration over its use of the Saving on a Valuable Education, or SAVE, Plan, another income-driven repayment program.
Federal Student Aid notes that forgiveness under SAVE, ICR and the Pay as You Earn Plan is paused since those programs were not created by Congress.
“Generally, ED can and will still process loan forgiveness for the IBR Plan, which was separately enacted by Congress,” the office says. “Payments on the PAYE, SAVE, and ICR Plans are counted toward IBR Plan forgiveness if the borrower enrolls in IBR.”
ED announced earlier this month that complying with the injunction represented an “additional step to bring fiscal responsibility to the federal student loan portfolio.” The department said SAVE allowed it to prevent borrowers from having negative amortization, which is an increase in the principal balance of a loan that’s caused by a failure to cover interest due.
“Since day one of the Trump Administration, we’ve focused on strengthening the student loan portfolio and simplifying repayment to better serve borrowers,” ED Secretary Linda McMahon said. “As part of this effort, the Department urges all borrowers in the SAVE Plan to quickly transition to a legally compliant repayment plan – such as the Income-Based Repayment Plan.”
Executive Director Mike Pierce of the Student Borrower Protection Center, a nonprofit with a stated purpose of advocating for “eliminating the burden of student debt,” said the same day as ED’s announcement that McMahon is drowning millions of people in unnecessary interest charges.
“Every day, we hear from borrowers waiting on hold with their servicer for hours, begging the government to let them out of this forbearance, and help them get back on track—instead, McMahon is choosing to jack up the cost of their student debt without giving them a way out,” Pierce claimed.
“McMahon is turning a lifeline into a trap and fueling one of the biggest wealth grabs from working families in modern history. It’s a betrayal,” he added.
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