2024 was a year of great change in the federal student loan debt space. Here’s a quick recap to help you kick off 2025 well-informed:
Closed Programs:
The federal “On Ramp” period came to an end in September 2024. All federal borrowers will now see negative credit reporting after 90 days of missed or partial payments. Federal borrowers become at risk of defaulting after 270 days of non-payment. The federal government is empowered to garnish the wages and seize the tax returns of borrowers with defaulted federal borrowers.
Borrowers who took advantage of Fresh Start at the end of September 2024 should now see that their loans have been pulled out of default. The deadline to utilize Fresh Start was October 2, 2024 at 2:59AM EST. Borrowers who remain in default must now utilize the traditional pathways of rehabilitation or consolidation to take their loan balance out of default.
Current Happenings:
On December 18, 2024 the Department of Education announced the resumption of ICR and PAYE Income Driven Repayment application processing. Of note, these plans were also created by the Department’s rule-making authority that is presently being challenged in the courts. Income Based Repayment (IBR) is the only Income Driven Repayment plan not effected by the ongoing litigation as the plan was created by federal statute.
Some federal borrowers have recently received discharge of the remaining balance of their federal loans due to the Income Driven Repayment Account Adjustment. Many more may stand to benefit from these adjustments. The calculation completion and publication date of these adjustment figures remain subject to speculation. The initial publication date of these figures was slated for December 2023. Since then, the Department has announced several revised deadlines that have since passed. There is no stated deadline for the final publication of these figures.
Ongoing Litigation:
The Department of Education’s rule-making authority is being challenged in the federal system with specific regard to its ability to create and implement Income Driven Repayment plans. The 8th Circuit has issued an injunction enjoining the Department from enacting further forgiveness under the SAVE and other income driven plans. As a result of the injunction, borrowers who enrolled in the SAVE plan prior to July 2024 have been placed into non-interest-bearing forbearances. Time spent in this forbearance does NOT count towards Public Service Loan Forgiveness or Income Driven Repayment Forgiveness.
Borrowers who were attempting to enroll in SAVE prior to July 2024 but who did not complete enrollment prior to the issuance of the 8th Circuit’s injunction and borrowers who have attempted enrollment in SAVE, ICR or PAYE should have been placed in an administrative processing forbearance for 60 days, then moved to a litigation-specific forbearance after 60 days. In many cases, borrowers have remained in the processing forbearance. Time spent in the processing forbearance, only counts toward both Income Driven Repayment Forgiveness and Public Service Loan Forgiveness. Borrowers enrolled in ICR and PAYE prior to the 8th Circuit’s injunction should continue to remit payment under the plan, as directed by their respective federal servicer. Borrowers making payments under ICR and PAYE during litigation will receive credit towards Public Service Loan Forgiveness and Income Driven Repayment Forgiveness.
Borrowers pursuing Public Service Loan Forgiveness with loans in forbearance due to the SAVE litigation may want to consider switching plans to earn credit towards Public Service Loan Forgiveness. Borrowers who are within a couple months of attaining a full payment count of 120 are strongly encouraged to consult with a student loan expert to obtain service-based discharge sooner than later given the changing political landscape to which the federal student loan space will soon be subject.
Need Help? Borrowers with questions regarding their private and federal student loan debt are encouraged to contact Neighborhood Legal Services’ Education Debt Consumer Assistance Program (EDCAP) at studentloans@nls.org or (716) 847-0650 ext. 445
