The Department of Education confirmed critical changes to its handling of applications for income-driven repayment (IDR) plans, following a court-ordered pause. These modifications seek to adjust monthly payment calculations and family size, while progress is made in the partial resumption of procedures for certain programs.
The suspension, which began in February, responded to a court ruling that blocked the SAVE plan (a Biden-era initiative), an initiative of the Biden administration. Although this program faces uncertainty, three alternatives – ICR, IBR and PAYE – will resume processing starting May 10. Officials assure that the technical and legal updates prioritize compliance with court orders without affecting existing rights.
Student Loans: Correcting Errors in Spousal Income Calculations
The American Federation of Teachers (AFT) filed a lawsuit in March arguing that the total stoppage of IDRs violated borrowers’ rights. The organization demanded to resume procedures for plans not linked to the SAVE litigation. A document presented Friday by the Department details schedules and operational adjustments, although without exact dates for resolving backlogged requests.
An initial court filing from the Department of Education created confusion by suggesting that spouses’ income would be included in payment calculations, even if they filed taxes separately. This contradicted federal regulations in force since 1994. The entity rectified the error this week, clarifying that only the size of the family will undergo modifications in its definition.
The change impacts married borrowers who use separate tax returns. Under previous SAVE rules, the spouse was not counted in family size. Now, courts are demanding that this variable be reinstated, which could reduce monthly payments by increasing the number of dependents. For example, a couple with two children would go from a family of 3 to 4 members.
Legal experts highlight that the amendment benefits borrowers, since a larger family size decreases the discretionary income used to calculate payments. However, organizations such as the Student Borrower Protection Center warn that technical adjustments do not resolve the uncertainty about 20-25 year forgiveness, a central element of the IDR.
Progress in restarting procedures for ICR, IBR and PAYE plans
Officials confirmed that student loan services will resume processing applications for three IDR plans in mid-May. The measure excludes SAVE, whose future depends on pending judicial resolutions. Borrowers in these programs will receive automatic notifications once their cases are reviewed.
Although there are no defined deadlines to eliminate the backlog of applications, the Department assures that it will prioritize cases with income certification renewals. “We are committed to ensuring that no one faces unmanageable payments due to administrative delays,” a spokesperson said. However, advocates criticize the lack of transparency in estimated wait times.
Borrowers close to completing 20-25 years of payments under IDR fear the pause will affect their eligibility for loan forgiveness. The Department clarified that the months in suspension would count towards the required total, provided that procedures are resumed soon. However, attorneys recommend documenting every communication with loan servicers.
