Student loan forgiveness, repayment application backlog under Trump

The Trump administration continues to move slowly in processing a massive backlog of applications from hundreds of thousands of student loan borrowers seeking debt forgiveness or an affordable repayment plan, a new court filing shows.

As of the end of November, 802,730 requests to transfer into an income-driven repayment plan remain pending with the Department of Education. IDR plans limit a borrower’s monthly bill to a share of their discretionary income and cancel any remaining debt after a certain period, typically 20 years or 25 years.

Another 80,210 applications were still under review with the agency for Public Service Loan Forgiveness Buyback. That program allows certain public servants with 120 months of qualifying public service employment to retroactively pay for any months they missed because of a forbearance or deferment.

Just 170 student loan borrowers enrolled in an IDR plan had their debt canceled during November, the agency reported, with 280 discharges issued for the month under PSLF.

“At this rate, they will never fully clear the backlog,” said higher education expert Mark Kantrowitz.

The Education Department did not immediately respond to a request for comment.

It’s unclear how the federal government shutdown — which spanned Oct. 1 to Nov. 12 — may have affected application processing during November. In its court filing, the agency only notes that the shutdown affected its ability to provide an exact number of new applications received that month.

Many student loan borrowers rely on IDR plans and the loan forgiveness programs to be able to afford their monthly payments and to eventually emerge from their debt, consumer advocates say.

Over 42 million Americans hold student loans, and the outstanding debt exceeds $1.6 trillion, according to the Congressional Research Service. 

As a result of a legal challenge brought by the American Federation of Teachers against the Trump administration, the Education Department agreed to share status updates on its processing of borrowers’ applications. The AFT, a teacher’s union representing some 1.8 million members, accused Trump officials of denying student loan borrowers their legally required rights. The lawsuit concluded in a settlement in October.

In March, Trump officials terminated nearly half of the staff at the Education Department, including many of the people who helped assist borrowers.

IDR plans and loan forgiveness remain hard to access under the Trump administration amid an especially difficult time for federal student loan holders. Trump officials said in April that more than 5 million borrowers were in default at that time, and that total could swell to roughly 10 million borrowers.

Borrowers are reeling from a weakening labor market and promises of relief that never materialized, experts say. The Biden administration announced debt forgiveness and a new repayment plan designed to dramatically reduce monthly payments, but Republican-led legal challenges blocked both of those provisions.

“The federal student loan portfolio is probably in the worst state it’s ever been in,” Kantrowitz said.

The Trump administration recently announced that borrowers who enrolled in the now-defunct Biden-era Saving on a Valuable Education, or SAVE, plan, will soon need to transfer to another plan. That could lead to millions of borrowers filing applications in the coming weeks or months. As of July, there were more than 7.6 million borrowers in SAVE, according to the Education Department.

Although SAVE has been fully blocked since a February court order, millions of borrowers remain enrolled in the SAVE forbearance that Biden officials established while the legal challenges against its program unfolded.

SAVE enrollees have already found it difficult to restart repayment on another plan, Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York, told CNBC earlier this month.

“Many clients have taken steps to move out of the SAVE forbearance but are waiting months for their IDR applications to be processed,” Nierman said.

In August, Trump officials resumed charging interest for borrowers who stayed in that payment pause.

“Their loans are getting bigger and bigger as interest accrues, but they can’t do anything about it,” Kantrowitz said.