The Income-Driven Repayment (IDR) and Consolidation Applications Are Back Online!

Oh, what sweet peace it brought me to see the "log in to start" button returned to its former blue, non-greyed-out glory. After a months-long hiatus due to the ongoing SAVE Plan litigation, the income-driven repayment (IDR) and consolidation applications are back online! 

While it's reassuring to see movement in the right direction, the Department of Education (ED) has not confirmed in writing they're actually processing them. I've been told they're processing IBR applications, but I haven't seen this personally, so take that for what you will.

With the return of the online application, borrowers are now wondering whether they should switch or recertify their current IDR plan, especially if they're stuck in the ongoing SAVE Plan forbearance. I'll guide you through some considerations.

Should you switch plans?

Numerous changes have been made to the IDR plans over the past few months, and it's essential to understand whether they're available and whether you qualify. The IDR application warns of this, too:

In short, while you can *technically* apply for any IDR plan, your application may not ultimately be approved if you're not eligible or the plan is no longer available.

Here are the plans you can choose from:

When you use the online application to apply for a new IDR plan, you'll be given five options to choose from:

• Income-Based Repayment (IBR) Plan
• Income-Contingent Repayment (ICR) Plan
• Paye As You Earn (PAYE) Repayment Plan
• SAVE (REPAYE) Plan
• Have My Loan Servicer Select My Plan (they will choose the plan that gives you the lowest monthly payment)

You can learn more about each plan and its eligibility criteria by clicking the "View Eligibility" button (which I'll also summarize in the next section). If you gave the ED permission to access your tax return(s) at the start of the application, you should also see the estimated monthly payment. Before moving on to the next portion of the application, you'll be prompted to select the plan you'd like to apply for.

A quick recap of each plan and what you need to know

I know this is a lot, but it's REALLY important to understand the nuances of each plan!

• Income-Based Repayment (IBR) Plan: 
  • Still accepting new applications; is more likely to survive the ongoing litigation than the other plans.
  • There are two versions of IBR: "Old IBR" and "New IBR." New IBR is the better of the two because its calculation leads to a lower monthly payment over a shorter repayment period (20 years vs. 25 years).
    • Eligibility criteria:
      • Must have a Partial Financial Hardship (PFH) to be eligible*. This calculator can help estimate whether or not you have one.
      • Must be a new loan borrower as of July 1, 2014.
      • If you apply for IBR, your loan servicer will automatically put you in New IBR if you're eligible; otherwise, you'll be placed in Old IBR.
      • You only need the PFH when you initially apply. If you no longer have a PFH but are already enrolled in the plan, they'll allow you to stay on it.

• Income-Contingent Repayment (ICR) Plan:
  • Still accepting new applications 
  • Eligibility Criteria: as of July 1, 2024, only Direct Consolidation loans that paid off Parent PLUS loans are eligible for the plan.*
  • *A borrower enrolled before the cutoff can remain enrolled in the plan if they recertify their income and family size annually by the deadline.

• Pay As You Earn (PAYE) Repayment Plan:
  • Stopped accepting new applications in July 2024.*
  • *Borrowers who applied before the deadline can remain enrolled in the plan if they recertify their income and family size annually by the deadline.
  • Eligibility criteria:
    • Must have a Partial Financial Hardship (PFH) to be eligible. This calculator can help estimate whether or not you have one.
    • Must be a new loan borrower on or after October 1, 2007, and must have borrowed after October 1, 2011.

• SAVE (REPAYE) Plan:
  • Still accepting new applications, with a big caveat...
  • ...it faces MANY legal challenges, so its future is very uncertain. If a borrower was enrolled in the plan before the processing pause or applies now, it's uncertain whether they'd be "grandfathered" into the plan if it's struck down or forced to apply for a different one.
  • Borrowers who enrolled in the SAVE plan before the processing pause went into effect are in administrative forbearance until the legal issues are resolved in court, meaning no one is making monthly payments on SAVE right now.
  • Eligibility criteria:
    • Must have Direct loans only.
    • Parent PLUS loans or Direct Consolidation loans that repaid Parent PLUS loans aren't eligible unless they utilize the double consolidation loophole before July 1, 2025.

Important considerations to keep in mind

Now that you know the options available, the biggest question becomes: what the @&$^ do you do?!??!! I hate to say it, but it depends. 

I am a financial planner, not necessarily your financial planner, so while I can't give you advice unless you're a paying client, I'll offer some points to ponder:

If you're stuck on the SAVE forbearance

I don't see it ending anytime soon, so you could a) get comfortable, b) consider switching to IBR if your income is low (current or prior tax returns) while you have a Partial Financial Hardship, or c) apply for economic hardship if you're eligible. Currently, time spent in the SAVE Plan administrative forbearance does not count toward forgiveness. If you're pursuing Public Service Loan Forgiveness (PSLF), you could eventually use the buy-back option to get credit for this time. No payments are due, and no interest accrues.

If you recently applied for an IDR plan, regardless of which one

Even though the online application is available, the ED hasn't indicated they've resumed processing them. You could consider contacting your servicer to ask to be placed in a 60-day processing forbearance (if they don't automatically place you in one). No payments will be due, but interest will accrue. Time spent counts toward PSLF.

If you're enrolled in PAYE, IBR, or ICR and are still making payments

Due to the uncertainty, I'd be hesitant to change anything UNLESS your income has substantially decreased, in which case you could consider recertifying. Be sure to recertify your income and family size by your deadline to remain enrolled in the plan. Your loan servicer will contact you when it's time to do so. It's SUPER important not to miss the deadline. Otherwise, you will be kicked off the plan and potentially unable to re-enroll, depending on the circumstances.

Remember: there is a chance your payment will increase

Any time a borrower switches to a new IDR plan or recertifies their income and family size annually, their monthly payment may increase if their income recently increased. 

TO BE SUPER CLEAR: To remain enrolled in your IDR plan, you must recertify your income and family size by your yearly deadline. Otherwise, depending on the circumstances, you will be kicked off the plan and potentially unable to re-enroll in it. Everyone's deadline is different, and if you don't know what yours is, please contact your loan servicer to confirm.

Recertification was paused due to the COVID-19 Forbearance, but notices are now going out to borrowers for the first time in years asking them to provide updated information to their loan servicer.

Regardless, more waiting is in our future

The next hearing for the SAVE Plan's litigation is scheduled for October 24th, after which I expect it to end up with SCOTUS. Once I know more, I'll send out an email newsletter and post a blog with an update.

This waiting and legal back-and-forth has been brutal, and I truly empathize with the borrowers stuck in it at no fault of their own.

I'm here for you! Contact me at emma@perkplanning.com if you'd like to work together.