Student loan borrowers in backlog for forgiveness, repayment plans

More than 800,000 federal student loan holders are stuck in a backlog of applications for an affordable repayment plan or loan forgiveness. A new court file is shown.

As of the end of December, 734,221 borrowers’ requests to switch to income-driven repayment plans were still pending with the U.S. Department of Education, the agency reported. An additional 83,370 borrowers continued to await decisions on their Public Service Loan Forgiveness Redemption applications.

IDR plans limit a borrower’s monthly bill to a portion of his or her discretionary income and cancel the remaining debt after a specified period of time (usually 20 or 25 years).

buyback option allows debtors to pursue PSLF They speed up their timeline for forgiveness by paying retroactively for the months they missed due to forbearance or deferment. PSLF, signed into law by President George W. Bush in 2007, offers debt cancellation to individuals who work for certain nonprofits or the government for ten years.

Some borrowers have now been stuck in backlogs for more than a year.

When CNBC spoke to librarian Katy Punch last summer, she had already been waiting eight months for a response to her PSLF buyback application. Punch, 38, said Thursday that he is “in the 14th month.”

“I check the Federal Student Aid chat fairly regularly and my buyback request is still open and ‘delivered,’” Punch said via email.

“I’m really worried that I won’t get the forgiveness that’s part of my loan agreement,” he said.

Consumer advocates say many student loan borrowers rely on IDR plans and the loan forgiveness program to meet their monthly payments and eventually get out of debt.

More than 42 million Americans have student loans and outstanding debt $1.6 trillionAccording to the Congressional Research Service.

The Department of Education did not immediately respond to a request for comment.

The Trump administration has made progress on the backlog of repayment plan applications, according to the report: About 802,000 claims were pending in November and about 1.4 million We were in July. But the backlog of PSLF buybacks is increasing. It was at 80,210 in November and 72,730 in July.

In December, the Department of Education reported receiving 258,465 new IDR plan requests and 5,090 buyback applications.

Trump officials agreed to share status updates on processing debtors’ applications in an October settlement with the American Federation of Teachers, a teachers union that represents about 1.8 million members. AFT sued the Trump administration last year, accusing officials of not giving student loan borrowers their legally required rights.

After the Biden administration’s Savings for Value Education (SAVE) plan was blocked in court, many student loan borrowers were forced to apply for a new repayment plan. Application backlog worsened by Trump administration move in March, experts say to conclude Consumer advocates say thousands of Department of Education employees, including many who assist borrowers, have called this out.

“Perhaps the U.S. Department of Education should not have laid off half its staff because they were unable to fulfill their responsibilities,” said higher education expert Mark Kantrowitz.

Difficulties accessing income-driven repayment plans and loan forgiveness come at a particularly difficult time for federal student loan borrowers. According to the report, approximately 9 million people are currently in default on their education debt. a new prediction By Protection Borrowers, an advocacy organization. The Trump administration is starting wage cuts this month, and experts are warning of the risk of tax refund seizures this spring.

Experts say borrowers are reeling from a weakening labor market and promises of aid that never materialize. The Biden administration had announced comprehensive debt forgiveness and a new repayment plan designed to significantly reduce monthly payments, but Republican-led legal challenges have blocked both of those programs.

“With millions of student loan borrowers teetering on the edge of default, this administration is using the limited resources it has created to garnish borrowers’ wages rather than defending borrowers’ right to affordable payments,” said Persis Yu, deputy executive director and executive counsel at Protecting Borrowers.