The U.S. Department of Education is set to expand eligibility for income-based student-loan repayment plans, potentially allowing more borrowers to benefit from lower payments and debt relief. This significant change follows the provisions outlined in President Donald Trump’s recent spending legislation, which eliminates the requirement for partial financial hardship to enroll in these plans.
Previously, borrowers seeking to join income-based repayment (IBR) plans needed to demonstrate that their monthly payments were less than the amount required to pay off their full loan balance over a ten-year period. This rule often excluded those with higher payments or those enrolled in repayment plans that are being phased out. The Department has announced that this change could be implemented by December 2025, opening the door for additional borrowers to access IBR.
In an update on the Federal Student Aid website, the Department confirmed its commitment to implementing these changes. The IBR plans allow borrowers to make monthly payments based on their income, with the promise of loan forgiveness after 20 or 25 years, depending on when the loans were taken out. This shift is expected to relieve financial pressure from borrowers who previously did not qualify due to the partial financial hardship requirement.
The guidance indicated that servicers will temporarily hold IBR applications that would otherwise be denied. “Servicers will process those applications after the system changes are completed,” the Department stated. Borrowers who had been previously denied due to the lack of partial financial hardship are encouraged to reapply once the application process is updated.
Concerns regarding the handling of IBR applications have been amplified by a lawsuit filed by the American Federation of Teachers, which accused the Department of delaying application processing. In response, the Department agreed to continue processing forgiveness for borrowers who meet the payment threshold. Some borrowers have reported that their loan balances have been eliminated entirely after reaching this threshold.
In addition to the changes in IBR eligibility, the Department is advancing other significant reforms included in Trump’s spending legislation. This includes a revision of existing income-driven repayment plans, which may soon be replaced with two new options, along with new borrowing limits on graduate and professional loans.
These developments occur as the administration proceeds with a broader effort to restructure the Department of Education. On November 18, 2023, the Department announced the transfer of several programs to other federal agencies, raising concerns among some Democratic lawmakers about the potential impact on student-loan borrowers. Senator Elizabeth Warren has called for an investigation into how these changes might impair federal oversight of student loan servicers, which are crucial for providing assistance to borrowers.
As the landscape for student loan repayment evolves, the Department of Education is tasked with balancing the implementation of these new provisions while addressing ongoing concerns regarding borrower support and oversight.
