The U.S. Education Department has resumed involuntary collections on defaulted federal student loans, potentially impacting about 5.3 million borrowers through wage garnishment. At the same time, legal challenges and administrative delays have created widespread confusion, especially around income-driven repayment (IDR) plans. Advocates like Natalia Abrams from the Student Debt Crisis Center have criticized the complexity of the system and the difficulty borrowers face in accessing clear guidance.
Income-Driven Repayment Plans Reopened, SAVE Plan in Forbearance Amid Legal Challenges
Applications for IDR plans—including the Income-Based Repayment, Pay As You Earn, and Income-Contingent Repayment plans—have reopened after a temporary court-ordered shutdown. The SAVE plan, a centerpiece of the Biden administration’s student loan policy, remains partially blocked due to ongoing litigation. Though applications are being processed again, delays are expected. Borrowers currently in IDR plans must also complete annual recertification, which varies individually.
Federal Student Loan Collections Resume as SAVE Plan Stalls and Borrowers Face Renewed ConfusionBorrowers enrolled in the SAVE plan have been placed under administrative forbearance during the legal challenge. This means no payments are required and interest does not accrue, though this time may not count toward Public Service Loan Forgiveness (PSLF). Abrams advises those impacted to monitor updates and consider switching to other available IDR plans in the meantime.
Loan Consolidation, Servicer Delays, Forgiveness Uncertainty, and Default Recovery Options for Borrowers
Loan consolidation is again available online, allowing borrowers to combine federal loans into a single payment. While loan forgiveness under Biden’s past actions appears to be secure, concerns remain about the future of PSLF, particularly following a Trump-era executive order proposing to limit eligibility. Despite these concerns, PSLF remains active, and borrowers are advised to continue making payments and document their progress.
Reaching loan servicers has become increasingly difficult due to high call volumes, with many borrowers reporting long wait times and dropped calls. For those delinquent but not yet in default, experts urge immediate action to avoid long-term credit damage. Options may include requesting forbearance, deferment, or switching to an IDR plan to regain good standing.
Borrowers in default are encouraged to engage with the Education Department’s Default Resolution Group to begin the process of loan rehabilitation or enroll in IDR plans. Rehabilitation, which requires nine consecutive on-time payments, offers a one-time path out of default. However, the Fresh Start program, which previously helped defaulted borrowers re-enter good standing, expired on August 31, 2024, leaving fewer options for those newly in default.
