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Department of Education Halts Income-Driven Repayment Applications Following Court Ruling

Overview of Recent Developments

The U.S. Department of Education has suspended applications for Income-Driven Repayment (IDR) plans and loan consolidation following a decisive ruling from a federal court. This action comes after the 8th Circuit Court of Appeals supported states in their assertion that the Secretary of Education lacked the authority to enact the Saving for a Valuable Education (SAVE) initiative.

Impact of the Court’s Decision

As a consequence of the court’s injunction, the Department of Education removed online applications from the Federal Student Aid website last Friday. The buttons that previously allowed borrowers to apply for various IDR options—such as Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), Pay As You Earn (PAYE), and the now-suspended SAVE plan—are currently inactive.

A notification on the IDR application webpage stated, “A federal court issued an injunction preventing the U.S. Department of Education from implementing the Saving on a Valuable Education (SAVE) Plan and other income-driven repayment (IDR) plans. As a result, the IDR and loan consolidation applications are currently unavailable.”

Legal Context and Implications

The suspension of these applications is a direct result of the 8th Circuit Court of Appeals’ affirmation of an earlier block on the SAVE plan. This ruling concluded that the Secretary of Education and former President Biden were overstepping their authority in creating what was considered a lenient repayment option.

Furthermore, the ruling raised concerns about the legitimacy of other IDR plans, with the opinion emphasizing that “the Secretary [of Education] lacks the power to authorize loan forgiveness in an ICR plan.”

Reactions and Future Considerations

Despite the unavailability of the applications, many advocates argue that the appellate decision does not necessarily imply the closure of all IDR plans. “This was a choice by the Trump Administration and a cruel one that will inflict massive pain on millions of working families,” stated Persis Yu, deputy executive director and managing counsel of the Student Borrower Protection Center.

Since July, borrowers enrolled in the SAVE program have been in a state of forbearance due to the ongoing litigation that has oscillated through federal courts. The Education Department had temporarily reinstated older repayment options to offer borrowers additional avenues for managing their loan obligations.

It remains unclear whether the Department of Education will transition current IDR borrowers to alternative repayment plans or if applications will be reactivated in the future. The department has not yet issued a comment regarding these ongoing changes.

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