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The Education Department will reject nearly a half-million applications
from people seeking to make lower payments on their student loans,
according to internal documents obtained by POLITICO.

The agency will deny 460,000 federal student loan borrowers who selected
the lowest monthly option for a payment plan based on their income. They
make up about 31 percent of a 1.5 million application backlog for
borrowers who are seeking Income-Driven Repayment, one of many options typically available for borrowers having difficulty paying back their
loans.

An Education Department spokesperson said the lowest monthly payment
option was the SAVE Plan, a Biden-era plan that would cap payments at 5
percent of the borrower’s discretionary income for undergraduate loans and
10 percent for graduate loans. It has been blocked by the courts since
June 2024.

“Loan servicers cannot process these applications as SAVE is no longer an option, as it is illegal,” a department spokesperson wrote in a statement
to POLITICO.

The agency is introducing two new payment plans and phasing out the matrix
of current options as part of President Donald Trump’s sweeping reconciliation legislation. His administration has railed against SAVE for being a burden to taxpayers and called for simplifying the loan repayment process as part of a broader strategy to reshape how students borrow and
pay back loans.

Borrowers who were signed up for SAVE are in a forbearance while the
courts decide the program’s future. The department has previously stated
it plans to move SAVE borrowers to different plans in the fall and has encouraged them to explore other repayment options.

Some student loan experts argue that borrowers may have not known they
were applying for SAVE when selecting the lowest monthly payment option.

It’s a “bit of struggle to understand” if they intended to apply for the Biden-era program that’s on hold, said Scott Buchanan, executive director
of the Student Loan Servicing Alliance, a servicer trade group that
represents MOHELA and Aidvantage, among others. He said its best to have borrowers just reapply entirely for a student loan repayment plan.

Student debt relief advocates are concerned people could have higher
monthly payments and end up paying more in the long run since borrowers couldn’t make qualifying payments toward forgiveness while in the SAVE forbearance.

“If their income has shifted in the last year, it’s going to result in a higher payment,” said Persis Yu, the deputy executive director and
managing counsel at Student Borrower Protection Center. “Since this time hasn’t counted toward cancellation, it means that people are ultimately
going to be paying more on their loans during the life of it.”

https://www.politico.com/news/2025/07/18/460k-borrowers-income-driven- repayments-plans-applications-will-be-denied-00463558

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