Trump Administration suspends 4 student loan repayment plans: it “will create severe hardship for millions of working families”

Applications for four federal student loan income-driven repayment (IDR) and loan consolidation plans have been suspended by the Trump Administration following a legal dispute over Joe Biden’s SAVE plan.

IDR plans suspended by Trump Administration

The four affected plans are:

Income-Based Repayment (IBR)

Monthly payments at 10 to 15 percent of a borrower’s discretionary income. Borrowers can qualify for loan forgiveness after 20-25 years of payments.

Income-Contingent Repayment (ICR)

Payments are either 20 percent of discretionary income or a fixed amount over 12 years, whichever is lower. Borrowers qualify for loan forgiveness after 25 years.

Pay As You Earn (PAYE)

Payments are capped at 10 percent of discretionary income. Borrowers can receive loan forgiveness after 20 years of payments. Only available to borrowers who took out loans after October 1, 2007.

Revised Pay As You Earn (REPAYE)

Requires payments of 10 percent of discretionary income. Loan forgiveness after 20 years for undergraduate loans and 25 years for graduate loans.

Biden’s SAVE plan blocked, borrowers affected

The SAVE plan, an income-driven repayment plan launched by the Biden administration in 2023, lowered monthly payments for borrowers and accelerated loan forgiveness. However, a group of Republican-led states filed a suit last year to stop it, claiming it was illegal.

In February, the 8th Circuit Court of Appeals extended and broadened a preliminary injunction, temporarily blocking the SAVE plan. The lawsuit will now be returned to a lower court.

As a result, eight million enrolled borrowers were placed in interest-free forbearance, while time periods for student loan forgiveness have been paused, essentially extending the length of time borrowers will be in debt.

A “malicious move” by President Trump

The Trump Administration has received plenty of criticism for the decision, including from Natalia Abrams, president and founder of the Student Debt Crisis Center.

“This was a purposeful decision by the Trump Administration to harm borrowers and in no way needed to be done. Shutting down access to income-driven repayment plans was not the decision of the 8th Circuit—it was a malicious move by the Administration that will create serious hardship for millions of working families,” Abrams said in a statement.

The Department of Education has had very little to say about the suspensions, although James Bergeron, its acting under secretary, told Newsweek the DoE was “currently working to ensure borrowers understand existing repayment alternatives allowed under the law”.

Many financial experts believe the repayment plans will be suspended for several months and will become available again with altered conditions.

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