New Update On Student Loan Repayment Backlog And PSLF Buyback Raises Alarms

Secretary of Education Linda McMahon submitted a new court filing on Wednesday providing updates on the status of a massive backlog associated with pending income-driven repayment plan requests and student loan forgiveness applications for the PSLF Buyback program. The latest filing suggests that the Department of Education continues to make painfully slow progress in working through the application backlogs. And in light of new developments associated with recent legislative and policy changes, the backlogs may actually soon get worse.

The latest filing by the Trump administration is part of an ongoing lawsuit filed by the American Federation of Teachers over stalled applications for income-driven repayment plans and PSLF Buyback. The Trump administration had halted IDR application processing earlier this spring, arguing that a pause was required to update its systems to comply with a new court order associated with a separate ongoing legal challenge over the SAVE plan. The AFT argued in its lawsuit that the IDR shutdown was unlawful, and was also preventing borrowers from pursuing Public Service Loan Forgiveness, a separate program that can provide student loan forgiveness to teachers, nurses, firefighters, and other public servants after 10 years of qualifying payments.

After the AFT filed its suit, the Department of Education resumed processing IDR requests. But the temporary shutdown exacerbated an existing backlog of applications. In the meantime, many borrowers pursuing PSLF who were stuck in the SAVE plan forbearance and were nearing the threshold for student loan forgiveness applied for PSLF Buyback because they were unable to quickly change their repayment plan. PSLF Buyback is a relatively new program that allows borrowers to make a lump sum payment so that prior periods of non-qualifying deferments or forbearance can count toward student loan forgiveness. But the surge in PSLF Buyback requests also caused a massive backlog, which was likely worsened by mass staff layoffs the Trump administraiton implemented at the Department of Education.

In April, the AFT and the department reached a temporary agreement whereby Trump administration officials would provide monthly updates on the application backlog associated with IDR requests and PSLF Buyback. In the meantime, the litigation would be temporarily paused to assess this progress. Secretary McMahon filed the department’s third such update on Wednesday. But the newest update shows that the department is still struggling to process applications for repayment plans and student loan forgiveness, just as the department is pushing millions of additional borrowers to switch plans in the face of new policy and legislative developments. Here’s the latest.

Trump Administration Struggles To Process Surge Of Student Loan Repayment Requests

The Department of Education latest status report on IDR application processing shows that administration officials and student loan servicers have made only a little dent in the backlog.

While the IDR application backlog has been reduced from nearly two million requests through April 30, the total current backlog is largely unchanged from the previous month. At the end of May, the department had processed 285,694 IDR applications, with 1,582,641 applications remaining in the queue. As of Wednesday’s update – which reflects processing figures through June 30 – the department has only processed an additional 186,731 applications, suggesting a significantly slower rate of processing in June as compared to May. And, concerningly, the total number of IDR applications in the backlog stood at 1,511,504 – largely unchanged from the prior filing. If processing continues at the current rate (a net backlog reduction of roughly 70,000 applications), it would take nearly two years for the department to clear the backlog.

The Department maintains that it is making progress in working through the IDR application backlog, and blames the Biden administration for the large number of student loan repayment plan requests that remain in the queue.

“The Department continues to make progress on the backlog of submitted IDR applications because of a processing pause put in place by the Biden Administration,” said the department in a statement last week. “Borrowers switching from the SAVE Plan to another IDR plan can expect quick and timely processing.”

Backlog Of Student Loan Forgiveness Requests For PSLF Buyback Grows Again

The latest filing also presented equally concerning updates about the PSLF Buyback backlog, which continues to move in the wrong direction.

In the department’s initial filing in May, the backlog of student loan forgiveness requests under PSLF Buyback stood at more than 49,000. The backlog then grew to more than 58,000 the following month, despite the department having processed several thousand PSLF Buyback requests. Wednesday’s filing indicates that the department has now processed another 2,224 PSLF Buyback applications, reflecting additional progress. But The PSLF Buyback application backlog has grown yet again from more than 58,000 at the end of May to 65,448 as of June 30. This means the backlog has grown by roughly a third over the course of the last three months, despite steady processing by the department.

Application Backlogs For Student Loan Forgiveness And Repayment May Soon Worsen

This bad news for student loan borrowers may only get worse due to new policy and legal developments. Last week, the Trump administration abruptly announced that starting on August 1, the Department of Education will begin charging interest on federal student loans that are subject to the SAVE plan forbearance. Borrowers enrolled in SAVE have had no payments and no interest accrual since last year due to the ongoing legal challenge over the future of the program. The administration argued that the resumption of interest charges is necessary to comply with a new court order in that lawsuit. But student loan borrower advocacy groups noted that nothing in that latest order requires the department to start charging interest again on covered student loans.

As a result of the administration’s decision to resume charging interest on student loans subject to the SAVE plan, the department is now actively encouraging more than 7.7 million borrowers to apply to switch to a different income-driven repayment plan. The department also noted that the future of the PAYE and ICR plans is also in doubt, particularly after President Trump’s so-called “Big, Beautiful Bill” authorized the eventual repeal of PAYE and ICR, as well as the SAVE plan. The department suggested that these borrowers also consider applying to change their repayment plan. The Income-Based Repayment plan, or IBR, would be the only alternative option. This could potentially add millions of additional applications to the existing backlog in the coming weeks and months.

“The Department urges all borrowers in the SAVE Plan to quickly transition to a legally compliant repayment plan – such as the Income-Based Repayment Plan,” said Secretary McMahon in a statement last week announcing the resumption of interest accrual. “Borrowers in SAVE cannot access important loan benefits and cannot make progress toward loan discharge programs authorized by Congress.”

What Student Loan Borrowers Can Do

Some student loan servicers have urged borrowers who applied for an IDR plan in April of this year or earlier to resubmit their application online using the newly restored IRS data retrieval tool, which can expedite application processing by automatically verifying a borrower’s income. The Department of Education appears to encourage using this feature, as well.

“Applying for an IDR Plan is quick and easy if borrowers provide consent for the Department to obtain their federal tax information directly from the Internal Revenue Service,” said the department. “This allows the Department to process borrowers’ IDR applications faster and eliminates the need for borrowers to manually upload their income information.” The department noted that student loan borrowers who provide this consent would also be eligible for automatic annual income recertification for existing IDR plans.