The Department of Education has paused student loan forgiveness under the Income-Based Repayment (IBR) plan. While IBR is one of several income-driven repayment options available to borrowers, it is currently the only one not facing any legal disputes or court-ordered blocks.
“Currently, IBR forgiveness is paused while our systems are updated,” announced the department in updated guidance on pending court challenges issued earlier this month. “IBR forgiveness will resume once those updates are completed.”
The department’s announcement corroborates previous statements by former education department officials. And it confirms what some borrowers who had reached the threshold for student loan forgiveness – but didn’t get a discharge – had already suspected. Here’s what we know, and what borrowers can do.
What is IBR and does it work?
The Income-Based Repayment (IBR) Plan is anincome-driven repayment planwith monthly payments that are generally equal to 15 per cent of your discretionary income, divided by 12. The amount of payment you have to make is 10 per cent if you are a new borrower on or after July 1, 2014.
Student loan forgiveness under IBR is calculated based on the borrower’s income and their family size. This formula determines how much money the borrower has to pay each month.
Payments are recalculated every 12 months. Those who do not pay back their entire student loan in the stipulated time, are then entitled to student loan forgiveness. For those who took a loan on or after July 1, 2014, the repayment tenure is 25 years, and before that it is 20 years.
Why has it been discontinued?
The Trump administration did not provide a solid explanation on why the plan was suspended.
The Department of Education suggested that IBR was paused “while our systems are updated to accurately count months not affected by the court’s injunction”, pointing to the SAVE plan.
According to Forbes, the department may be referring to a federal appeals court injunction to block SAVE to include the basic regulation that governs the SAVE plan. The IBR is among the income-driven repayment plans, which are indirectly affected by the court’s order.
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