Americans banking on their student loans being wiped out are spiraling into panic mode.
With just days to go before the August 1 deadline, millions are still unsure if their loans will be forgiven, as the Education Department hits pause on IBR student loan forgiveness amid a legal storm surrounding the Biden administration’s SAVE plan. For around two million borrowers in the Income-Based Repayment (IBR) plan, this unexpected stall has left their financial futures in limbo.
The IBR plan is one of several income-driven repayment (IDR) options that promise loan forgiveness after 20 to 25 years of consistent payments. But right now, those years of payments aren’t being properly counted. That’s because a federal court injunction in February blocked the SAVE plan’s regulatory framework, forcing the Department of Education to halt payment tracking across all IDR plans while they figure out how to move forward. Even though the injunction didn’t kill IBR outright, it messed with how qualifying months are calculated, and that means nobody’s forgiveness is processing.
On its Federal Student Aid site, the Education Department quietly dropped the bombshell earlier this month: IBR forgiveness is paused until system updates are complete. “IBR forgiveness will resume once those updates are completed,” the department said. Translation: if your loan was about to be canceled, you’ll have to wait.
The SAVE plan’s legal freeze also affects how deferments and forbearances count toward forgiveness. That threw off the loan forgiveness progress counters entirely, leaving people without any way to see how close they were. Betsy Mayotte from the Institute of Student Loan Advisors broke it down, saying the feds had to yank the trackers to either wait out the lawsuits or reprogram everything to skip affected deferment periods post-February.
Despite the stall, you can still make payments, and if you overpay after becoming eligible for discharge, the Education Department promises to refund that extra cash. Deputy Press Secretary Ellen Keast confirmed that forgiveness processing will pick back up once correct payment counts can be confirmed.
But this IBR pause is just one of many shakeups hitting student borrowers. Starting August 1, interest is back on for nearly eight million borrowers under the SAVE plan. Those folks had been in an administrative forbearance with no interest, but the court ruling yanked the department’s power to keep rates at 0%. Now interest will start racking up again, even if payments aren’t technically due yet.
And there’s more. Trump’s recently passed One Big Beautiful Bill is bringing in strict new rules, limiting borrowers to just two repayment options moving forward. Meanwhile, nearly six million Americans are over 90 days past due on their student loans, and they’re at risk of getting 15% chopped straight off their paychecks.
Student loan debt in the U.S. has now ballooned past $1.77 trillion. The average federal loan borrower carries a crushing $38,375. And while some cling to the hope of eventual forgiveness, many are stuck in limbo, angry and anxious as policies shift under their feet. For now, all eyes are on the Education Department, waiting for them to hit “resume” on forgiveness and bring some clarity before interest starts piling on in August.
Leo Cruz brings sharp insights into the world of politics, offering balanced reporting and analysis on the latest policies, elections, and global political events. With years of experience covering campaigns and interviewing world leaders, Leo ensures readers are always informed and engaged.
