Citing Legal Challenges to SAVE Program ED Moves to Renew ICR, PAYE Repayment Plans
Megan Walter, Senior Policy Analyst
The Department of Education (ED) on Friday published an Interim Final Rule (IFR) to reopen the applications for and allow borrowers to enroll in the Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) repayment plans, effective December 15, 2024, through July 1, 2027.
This change, which takes advantage of statutory authority to bypass the usual notice and comment period as well as early implementation, addresses the current lack of an available ICR option after the rollout of the new SAVE plan — a replacement for REPAYE, PAYE, and ICR — was temporarily blocked due to ongoing litigation. With this rule, borrowers will still be able to apply for the SAVE plan (though they will enter administrative forbearance upon enrollment) and now may apply for the original ICR and PAYE repayment options, which had been sunsetted in the blocked SAVE rules, in addition to the Income-Based Repayment (IBR) plan and standard repayment plans which remained unaffected by litigation.
For some borrowers, there might be an advantage to enrolling in one of these previously sunset programs.
“Borrowers whose priority is to pay off their loans more quickly, particularly those early in their careers when their monthly payments under an IDR plan might be the lowest, may prefer to resume payments sooner rather than later,” NASFAA’s policy team said. “Paying now, while their income (and thus their payments) is lower, might make more financial sense, in which case they would need to switch to a new repayment plan.”
ED also indicated in Friday’s notice that it is working to offer borrowers a version of the SAVE repayment plan that is compliant with the court’s injunction. This would allow the department to resume collecting payments under the SAVE plan. ED does not expect that work to be completed until “well into 2025.”
Borrowers looking to continue to postpone their payments’ interest-accrual free can continue their enrollment in the SAVE plan until the legal proceedings are resolved, likely extending well into 2025.
If a borrower is interested in resuming payments in order to resume their count towards Public Service Loan Forgiveness (PSLF) or time-based forgiveness they may want to consider switching from SAVE to the IBR, PAYE, or ICR plan once these options become available in mid-December, though processing times are currently uncertain.
“For borrowers who decide to switch to another IDR plan despite the processing delays and uncertainty, patience and thorough documentation are key,” NASFAA’s policy team said. “We recommend keeping detailed records, such as taking screenshots of your loan balances and interest rates, particularly if you have multiple loans or are switching servicers. This documentation will be invaluable in case of discrepancies or issues during the transition.”
Publication Date: 11/18/2024
Paul L | 11/19/2024 11:6:15 AM
Repayment and payment counts are a complete mess. I'd be surprised if they ever dig out of this mess.
Tai W | 11/18/2024 9:11:47 AM
My understanding is that the servicers are not processing ANY IDR requests; even those requesting IDR plans other than SAVE. From what the servicers are saying, the non-processing of any IDR request is because of the direction (or lack thereof) from ED. *Does this mean IDR requests for IBR, ICR and PAYE will actually be processed by the servicers?*
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