Breaking Down the Latest Changes to Federal Income-Driven Repayment Plans
The U.S. Department of Education has introduced critical updates to federal student loan repayment plans, extending access to Income Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans through July 1, 2027. These changes come as a temporary solution while legal and administrative updates are made to the Saving on a Valuable Education (SAVE) plan. Here’s what borrowers need to know about these updates and how they might impact repayment strategies.
Key Highlights of the New Rules
1. Extended Enrollment Deadlines for ICR and PAYE
Borrowers now have until July 1, 2027, to enroll in ICR or PAYE repayment plans. This extension ensures that all federal student loan borrowers can access income-driven repayment options, even as updates to the SAVE plan face delays.
2. SAVE Plan Challenges
The SAVE plan, which replaced the 2015 REPAYE plan, has been delayed due to ongoing legal challenges. Features such as increased income protection, and loan forgiveness are currently under review in federal courts.
To address these delays, the Department of Education has temporarily reopened access to older plans like PAYE and ICR.
What This Means for Borrowers
Simplified Access to Repayment Plans
For borrowers who wanted to opt out of the SAVE plan, the temporary reintroduction of PAYE and ICR ensures continuity. Borrowers can choose plans based on their financial situation:
- PAYE: Payments capped at 10% of discretionary income, ideal for borrowers with moderate income growth.
- ICR: A broader plan that considers family size and income but may result in higher payments than PAYE.
Support for Public Service Loan Forgiveness (PSLF)
Borrowers working towards PSLF can continue making qualifying payments under PAYE or ICR, avoiding disruptions caused by SAVE plan delays.
How the New Regulations Benefit Borrowers
- Prevents Repayment Gaps
Borrowers impacted by legal injunctions against the SAVE plan can avoid repayment pauses or the risk of default by switching to PAYE or ICR. - Extended Timeline for Decision-Making
The 2027 deadline allows borrowers more time to explore repayment options and determine which plan best suits their needs. - Flexibility During Litigation
Borrowers affected by court rulings can still access plans compliant with the Higher Education Act (HEA), ensuring federal compliance while litigation continues.
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