Department of Education Announces Borrowers Can Now Apply for Additional Income-Driven Repayment Plans
Author: Department of Education Office of Communications and Outreach (OCO) | Posted on: December 18, 2024
Reopening These Plans Ensures Borrowers Have Legally Required Repayment Options, Including for Borrowers Impacted by the SAVE Litigation
The U.S. Department of Education (Department) today announced the reopening of two student loan repayment plans to give borrowers more options to keep their payments low. The Pay As You Earn (PAYE) Repayment and Income-Contingent Repayment (ICR) plans offer credit for Public Service Loan Forgiveness (PSLF) and income-driven repayment (IDR) to eligible borrowers enrolled in the currently enjoined Saving on a Valuable Education (SAVE) Plan, as well as additional terms that borrowers may wish to consider.
“The Department continues to defend in court the authority to cut payments for borrowers with high debts and low incomes through the SAVE Plan,” said U.S. Under Secretary of Education James Kvaal. “In the meantime, we are making more options available to low-income borrowers, teachers, servicemembers, and other public servants so they can make the best choices for their financial situation.”
The PAYE and ICR plans are two of the Department’s IDR plans, which set monthly payments based on borrowers’ earnings and family size and have allowed borrowers to earn forgiveness after extended periods of payments. Many public servants use them to keep their monthly payments low as they work to earn PSLF after 10 years.
The PAYE and ICR applications are available at StudentAid.gov/idr. To apply, borrowers will log in to their StudentAid.gov account and upload income information, such as a tax return.
PAYE and ICR plans were initially established in 2012 and 1996, respectively. The Department closed the PAYE and ICR plans to most new enrollments last summer because the Biden-Harris Administration’s SAVE Plan offered lower or the same payments and other benefits. However, a series of court rulings in lawsuits waged by elected officials have suddenly changed the terms of student loan repayment, affecting millions of borrowers.
The Biden-Harris Administration is fighting to give borrowers more breathing room on their student loans -- which includes vigorously defending the SAVE Plan in court. While litigation over the SAVE Plan continues and the Department and its loan servicers reprogram systems to bill borrowers in a way that complies with the court’s injunction, the Department placed borrowers enrolled in SAVE in forbearance. These borrowers do not owe payments on their loans and their loans are not accruing interest, but these months do not provide credit toward PSLF or make progress toward satisfying IDR plans.
Once their servicer enrolls them in the new repayment plan, payments will be due, interest will accrue, and the payments will provide credit toward PSLF and IDR.
If servicers need additional time to process a borrower’s PAYE or ICR application, the servicer will place the borrower in a processing forbearance for up to 60 days, during which time no payments are due, interest accrues, and the time will count toward PSLF and IDR forgiveness.
PAYE offers the lowest payments to most borrowers. Borrowers make no payments on the first $22,590 of income for single individuals ($46,800 for a family of four) and 10 percent of income above those amounts.
ICR provides $0 payments for single individuals earning up to $15,060 ($31,200 for a family of four) and 20 percent of income above that amount. It also has an alternative payment formula that may result in lower payments for borrowers whose loan debt is low relative to their income.
The Department authorized the new enrollments through regulatory changes that are now effective. The PAYE and ICR plans will remain available to new enrollment until July 1, 2027.
For more information on the SAVE injunction, visit ed.gov/save.
Image courtesy of Unsplash - Katie Mourn