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Many student loan borrowers have hit a repayment obstacle: the U.S. Department of Education denied their application to switch into a new payment plan.
The department rejected 327,955 borrower requests to be enrolled in an income-driven repayment plan in August alone, according to a Dec. 15 court filing.
The denials mean many of these borrowers may remain stuck in their prior repayment plan with a higher monthly payment, or in an interest-accruing forbearance. As of the end of November, another 802,730 IDR plan applications remain pending with the Education Department.
Millions of student loan holders rely on IDR plans to afford their payments and eventually, to emerge from their debt. The plans cap borrowers’ monthly bills at a share of their discretionary income, and lead to debt cancellation after a certain period, typically 20 years or 25 years. Those pursuing the popular Public Service Loan Forgiveness program, which leads to debt erasure for public servants after a decade, also typically need to be enrolled in an IDR plan.
Consumer advocates said they were alarmed by the number of denials.
“This could cause further delays — losing out on qualifying months for Public Service Loan Forgiveness and IDR cancellation — and many of these borrowers will wind up paying a higher amount each month,” said Persis Yu, deputy executive director and managing counsel at Protect Borrowers.
More than 42 million Americans hold student loans, and the outstanding debt exceeds $1.6 trillion.
The Education Department did not respond to a request for comment.
As part of a settlement between the American Federation of Teachers and the Trump administration, the Education Department has been required to provide status reports on its progress on a backlog of hundreds of thousands of IDR plan applications from student loan borrowers.
The teacher’s union, which represents nearly 2 million members, filed a lawsuit against the administration in March, accusing it of depriving student loan borrowers of their rights. Protect Borrowers served as AFT’s legal counsel.
Here’s what to know about the recent IDR plan application denials — and what to do next if it happened to you.
Why some IDR applications were rejected
The Education Department said in the court filing that it rejected the hundreds of thousands of IDR applications because of an “unforeseen ambiguity” about which repayment plan the borrowers should have been enrolled in.
These federal student loan holders had requested to be put in the plan with “the lowest monthly payment,” according to the filing. But Trump officials said two plans result in an equal monthly bill.
“In response, ED opted to procedurally deny such applications,” the agency said in the court document.
Yu said the Trump administration’s reasoning did not follow established guidelines.
“The IDR application anticipated two possible repayment plans with equal payment amounts and provided a plan for such a case,” Yu said. In these situations, there is a ranking of IDR plans the Education Department is supposed to follow, she added.
Higher education expert Mark Kantrowitz also said he questioned the Trump officials’ explanation.
“The U.S. Department of Education’s justification for rejecting these borrowers is weak,” Kantrowitz said.
What borrowers should do next
The difficulty accessing an affordable student loan repayment plan comes at an already trying time for borrowers. More than 5 million student loan holders are currently in default, and that total could swell to roughly 10 million borrowers soon, the Education Department said earlier this year.
The Education Department confirmed to CNBC on Tuesday that it will begin garnishing the wages of borrowers in default on student loans in early January.
The U.S. Department of Education’s justification for rejecting these borrowers is weak.
Mark Kantrowitz
higher education expert
If your application for an IDR plan was rejected, file a new request as soon as possible, said Kantrowitz.
Borrowers should select a specific plan on their application, “partly because the borrower should make an informed decision,” Kantrowitz said, and also because of the recent denials related to ambiguity over which plan has the lowest monthly payment.
The Biden administration’s Saving on a Valuable Education, or SAVE, plan is now defunct, after a court blocked the program. And President Donald Trump’s “big beautiful bill” phases out some other IDR plans.
As a result, the best current option for many borrowers is the Income-Based Repayment plan, or IBR, Kantrowitz said. Under the terms of IBR, borrowers pay 10% of their discretionary income each month — though that share rises to 15% for certain borrowers with older loans.
There are several tools available online to help you determine how much your monthly bill would be under different plans.
You can submit a request for an IDR plan at StudentAid.gov.
