4 Major Updates Impacting IDR Plans and Student Loan Forgiveness

Student loan borrowers continued to face daunting challenges this month as turmoil, backlogs and shutdowns undermine the federal student aid system.As significant legislative changes are now just starting to be implemented, the confusion and uncertainty that many borrowers are facing is only getting worse, particularly for those pursuing student loan forgiveness and income-driven repayment (IDR).Here’s a breakdown of several major updates student loan borrowers should be aware of as summer comes to a close and more turbulence is on the horizon.Student loan interest resumes for SAVE plan borrowers, but payments remain paused As of August 1, 2025, interest is accruing again for the nearly eight million borrowers enrolled in the Saving on a Valuable Education (SAVE) plan.

Interest and payments had been paused under an ongoing administration forbearance that has been in effect for more than a year now — a result of a legal challenge brought by a coalition of Republican-led states trying to block the SAVE program.The Trump administration argued that resuming interest charges on SAVE plan borrowers was required following recent court rulings related to that litigation, but critics have disputed this, noting that no court has ordered the Department of Education to resume charging interest.“For years, the Biden Administration used so-called ‘loan forgiveness’ promises to win votes, but federal courts repeatedly ruled that those actions were unlawful.Congress designed these programs to ensure that borrowers repay their loans, yet the Biden Administration tried to illegally force taxpayers to foot the bill instead,” said U.S.

Secretary of Education Linda McMahon in a statement last month announcing the resumption of interest.“Since day one of the Trump Administration, we’ve focused on strengthening the student loan portfolio and simplifying repayment to better serve borrowers.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.Borrowers in SAVE cannot access important loan benefits and cannot make progress toward loan discharge programs authorized by Congress.”  While interest has now resumed, payments for SAVE plan borrowers remain paused under the administrative forbearance for now.

It is not clear when, exactly, payments will resume.The SAVE plan will be repealed by July 1, 2028 under the “One, Big, Beautiful Bill Act” signed into law by President Trump last month, although it’s possible (if not likely) that the plan will disappear sooner than, particularly if a court strikes down the program.  In the meantime, the Department of Education is encouraging borrowers who want to resume making progress toward student loan forgiveness to switch to a different income-driven repayment plan.The administrative forbearance associated with the SAVE plan legal challenges still doesn’t count toward IDR loan forgiveness or Public Service Loan Forgiveness (PSLF).IBR student loan forgiveness remains paused Meanwhile, the Department of Education has not resumed processing student loan forgiveness under the Income-Based Repayment (IBR) plan.

The department suspended IBR loan forgiveness earlier this year, saying the pause was necessary in order to update internal systems to comply with recent court rulings.“Currently, IBR forgiveness is paused while our systems are updated to accurately count months not affected by the court's injunction,” said the Department of Education in online guidance that was updated in July.“IBR forgiveness will resume once those updates are completed.” Critics have noted that no court has blocked IBR student loan forgiveness, nor is the program even facing a legal challenge.Even the conservative Eighth Circuit Court of Appeals, which blocked the SAVE plan and called into question student loan forgiveness under the Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans, acknowledged that Congress expressly allowed for student loan forgiveness under IBR for borrowers who reach the 20- or 25-year repayment threshold.

Earlier this month, a group of Democratic senators sent a formal letter to the Department of Education, demanding answers on the IBR student loan forgiveness pause.“We write to express our strong opposition to the Department of Education’s (“the department”) recent action to suspend forgiveness under the Income-Based Repayment (IBR) Program and to demand information on behalf of the millions of student loan borrowers who have been stripped of their ability to access forgiveness for which they are entitled to under law,” wrote the lawmakers.“The department has also provided no timeline for when it will resume forgiveness under IBR, which is alarming considering many borrowers have already been waiting months for relief.” Complicating matters is the looming end-of-year deadline, when student loan forgiveness under IBR and other income-driven repayment plans reverts to being taxable again under federal law, after congressional Republicans declined to extend temporary tax relief that had been provided under the American Rescue Plan Act of 2021.Backlogs continue for IDR and PSLF Buyback applications In the meantime, borrowers trying to get back on track for student loan forgiveness under IDR and PSLF continue to face headwinds as the Department of Education struggles with ongoing backlogs.

According to this month’s status report filed with a federal district court as part of an ongoing legal challenge over the department’s handling of IDR applications, the department revealed that the IDR application backlog was reduced from more than 1.5 million applications in June to just over 1.3 million applications last month — a modest decline that shows progress, but also suggests that many borrowers may continue to wait months before they can switch into their selected IDR plan.Meanwhile, the backlog for PSLF Buyback applications has continued to grow.While the Department of Education processed another 3,280 PSLF Buyback applications last month, the backlog grew from around 65,000 in June to more than 72,000 in July, indicating that the department is unable to keep up with applications that continue to pour in from borrowers desperately seeking student loan forgiveness under PSLF.Student loan borrowers get updates on OBBB implementation While much of the recent student loan news has been fairly bad, borrowers did get some modestly positive updates this month as the Department of Education provided clarifying guidance on implementation of the “One Big, Beautiful Bill Act” (OBBB).  Specifically, the department confirmed that current borrowers will have an easier time enrolling in the IBR plan, which is the only IDR option that is preserved under the legislation.

This is due to the impending removal of the partial financial hardship (PFH) rule.The PFH rule limited enrollment in IBR to borrowers whose monthly payments under the plan would be less than what the borrower would pay under a 10-year Standard plan.The elimination of the PFH requirement means more borrowers can enroll in IBR.Furthermore, the department clarified that notwithstanding the removal of the PFH requirement, IBR borrowers will still be able to maintain a cap on their monthly payments equivalent to the 10-year Standard plan payment amount.  “Though the Act removes the requirement to have partial financial hardship to enroll in the IBR Plan, monthly payment amounts under IBR will continue to be capped at an amount equivalent to the Standard Repayment Plan with a 10-year repayment period,” said the department in online guidance updated earlier this month.

“This means that payments on the IBR Plan will never be higher than payments on a Standard Repayment Plan with a 10-year repayment period.” It will take the department some time to update its systems to reflect the elimination of the PFH requirement.No timeline has been provided, so some student loan borrowers who can’t enroll in IBR due to the PFH barrier may need to wait a bit longer before they can apply.