- Student loan borrowers can still enroll in PAYE and ICR , but loan forgiveness at the 20- or 25-year mark is paused due to a court injunction.
- Forgiveness under PSLF remains unaffected and is still available to those using PAYE or ICR for public service.
- We suggest staying in PAYE or ICR unless switching to IBR leads to lower monthly payments.
As legal disputes continue over the Department of Education’s SAVE Plan, borrowers using older income-driven repayment plans like Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) are left in limbo.
The 8th Circuit Court of Appeals has halted loan forgiveness under both plans, citing a lack of clear statutory language allowing the Department to cancel outstanding balances after 20 or 25 years.
Despite the ruling, borrowers can still enroll in these plans, make monthly payments, and work toward Public Service Loan Forgiveness (PSLF). However, those counting on forgiveness after 20 years of payments need to wait for more clarification from the courts.
Enrollment Open, Forgiveness Currently Blocked
The federal court ruling doesn’t block the PAYE or ICR plans. Borrowers can continue to use them to lower their monthly payments. For many, especially those with older loans or unique financial situations, PAYE and ICR offer manageable repayment terms and access to PSLF.
The issue is forgiveness after 20 or 25 years.
Both PAYE and ICR have long included wording that says you only make 20 or 25 years of payments. But the 8th Circuit questioned whether the statute actually grants the Department of Education the authority for forgiveness at the end of the term. While IBR has explicit forgiveness terms written into law, ICR and PAYE rely on older language interpreted by regulation, not statute, which the court rejected.
One overlooked outcome of the legal argument is that, under a strict reading of the statute, repayment ends after 20 or 25 years, but without forgiveness. That could leave some borrowers with zero-dollar payments and no further collection, but also no cancellation.
That’s why we’re waiting to see the outcome of this court case.
PSLF Forgiveness Remains Fully Operational
Borrowers working in public service who use PAYE or ICR for their qualifying payments are not affected by the court ruling. Forgiveness through PSLF is explicitly written into a separate federal law. That includes 10 years of qualifying payments and employment, regardless of which income-driven repayment plan a borrower uses.
The Department of Education has confirmed that borrowers using PAYE or ICR will still have their balances canceled through PSLF after meeting the requirements.
The legal challenge applies only to the standard forgiveness at the end of a full repayment term under ICR or PAYE, not to forgiveness through PSLF, IBR, or other loan forgiveness programs.
Should You Leave PAYE Or ICR?
For now, no – most borrowers in PAYE or ICR should stay put.
Borrowers in PAYE and ICR should continue making payments normally, especially if pursuing PSLF. Those aiming for standard 20 or 25 year forgiveness should be aware that their expected cancellation is paused while the courts weigh the Department’s authority. A final resolution may come from the Supreme Court or through Congressional action (such as by passing the new RAP plan).
Borrowers should not panic or rush to switch plans unless doing so lowers their monthly payments or clearly benefits their long-term repayment strategy. Legal uncertainty doesn’t mean the plans are invalid, only that the forgiveness provision is on hold – for now.
We don’t expect any quick resolution to this either, so borrowers will have plenty of time to assess their options if something does change.
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