Millions Affected by Student Loan Backlogs and Defaults

The Department of Education provided new insights and data on an assortment of problems that are currently plaguing the federal student loan system.The new information was relayed to Senator Elizabeth Warren (D-MA) via a letter by Acting Assistant Secretary of Education for Legislation and Congressional Affairs Sarah Ursprung.Ursprung’s letter confirms the existence of substantial backlogs, many of which hinder the ability of student loan borrowers to access student loan forgiveness, enroll in affordable repayment plans, or address student loan servicing issues.Although the current backlogs associated with various programs predate the Trump administration, critics have argued that the backlogs have worsened since the department initiated a reduction in force earlier this year, which effectively cut the department’s staff by roughly 50%.  The department’s letter provides little insight into when (or if) things will start to improve.

Here’s a breakdown.Backlog of IDR applications for student loan borrowers continues The letter to Senator Warren confirms that the income-driven repayment (IDR) application system continues to be plagued by significant backlogs.However, the Department of Education blamed court orders and the Biden-Harris administration for the ongoing problems with IDR application processing.“You… inquired about the Biden-Harris Administration’s Saving on a Valuable Education (SAVE) Plan and the backlog of IDR applications,” reads the letter.

“While we regret the delay and the backlog, the Department must comply with court orders, including injunctions, and pause work if required as it did under the previous Administration in August 2024.In February 2025, the IDR application was temporarily paused to comply with the injunction issued by the U.S.Court of Appeals for the Eighth Circuit that ordered the Department to cease implementation of SAVE Plan and parts of other IDR plans.Because the online application incorporated provisions subject to the injunction, it was necessary to revise the form, making it unavailable to borrowers in the interim… It is unfortunate that the Biden-Harris Administration chose to issue the so-called SAVE Plan, as the courts were inevitably forced to intervene to halt the unlawful plan, which resulted in a backlog of applications.” The department indicates that as of July, “there were approximately 1.49 million IDR applications awaiting processing.” Separately, the department has suggested that it intends to deny approximately one-third of these applications, primarily for borrowers who applied for the SAVE plan (which remains blocked) or selected an option for their loan servicer to choose their plan for them based on the lowest monthly payment (which the department argues is impossible given a court injunction that blocks the SAVE plan, which typically offers the lowest monthly payment of all available income-driven plans).  Backlog of PSLF Buyback applications grows Student loan borrowers also continue to face mounting trouble with the PSLF Buyback program, which offers borrowers an opportunity to make a lump-sum payment so that certain periods of deferment or forbearance that did not count toward student loan forgiveness can qualify under PSLF.

In order to make that lump sum payment, borrowers must first submit a formal PSLF Buyback request, which then must be evaluated by the department.Department staff must then approve a buyback amount, and send that to the borrower via a formal approval letter.Thousands of borrowers who are nearing the threshold for student loan forgiveness under PSLF, but are stuck in the SAVE plan forbearance, have been applying for PSLF Buyback.But many have been waiting months for approval due to the department’s large and growing backlog of requests.  “PSLF borrowers can now ‘buy back’ certain months in their payment history to make those months qualifying payments for PSLF purposes,” reads the department’s letter to Senator Warren.

“Specifically, a borrower can buy back months that do not count as qualifying payments because they were in an ineligible deferment or forbearance status.During the month of May 2025, FSA received 8,713 PSLF buyback cases and processed 6,875.As of mid-June, the Department had received 65,595 total PSLF buyback applications.FSA continues to process these requests as expeditiously as possible in the order they were received.” However, the letter leaves out the fact that the department’s PSLF Buyback backlog has grown from around 49,000 in April 2025 to more than 65,000 in June, despite processing thousands of applications during that period.

The department revealed this information in a separate court filing in July.New data on backlog of student loan borrower disputes As student loan borrowers encounter a seemingly ever-changing landscape, getting clear, up-to-date information can be challenging.And when borrowers believe that a loan servicer has misled them or made a mistake, it’s becoming increasingly difficult to get a resolution.New data included in the department’s letter to Senator Warren suggests that the Office of Federal Student Aid (FSA) is contending with a significant backlog of student loan disputes and complaints submitted to the Ombudsman Group and the Feedback group, two units within FSA that handle and investigate borrower disputes.

According to the data, the Feedback unit has 41,507 open cases, while the Ombudsman group has 27,006 open cases.A portion of the Ombudsman cases involves court-mandated activity, such as implementing the ongoing Sweet v.Cardona settlement, which means there are even fewer FSA Ombudsman staff to field borrower complaints and investigate student loan servicing errors.  FSA has been hit hard by the department’s staff reductions.According to the letter to Senator Warren, 259 department staff accepted buyout offers earlier this year, including 126 FSA staff.

Student loan defaults are rising Meanwhile, millions of federal student loan borrowers are in default — and that number may grow as more and more borrowers have difficulty accessing affordable repayment plans.“As of June 2025, there were 5.6 million borrowers in default,” said the department in its letter to Senator Warren.In a statement issued in April, the department warned that the number of borrowers who are in default on their federal student loans could approach 10 million by the end of the year.The department is in the early stages of resuming collections efforts against defaulted federal student loan borrowers.

Those efforts can include garnishing wages, intercepting federal tax refunds, and offsetting federal benefits.  “The Department is committed to keeping borrowers updated with clear information about their payment options to put them on a productive path toward repaying their federal student loans,” reads the letter.“In April 2025, the Department announced that it would resume involuntary collections of its defaulted federal student loan portfolio on May 5, as required under the Higher Education Act and conducted only after sufficient notice to student and parent borrowers.  Following this announcement, the Department launched a comprehensive communications and outreach campaign to engage all borrowers on the importance of repayment.FSA has conducted outreach to borrowers through emails and social media reminding them of their obligations and providing resources and support to assist them in selecting the best repayment plan.”