Borrowers with the PAYE and ICR income-driven repayment (IDR) plans can rest easier knowing that they’re back on track for Public Service Loan Forgiveness. Previously, the Department of Education had stopped processing PSLF and IDR applications following a federal court decision that froze the SAVE plan. That decision prompted a lawsuit from the American Federation of Teachers alleging that the Department was illegally blocking access to reasonable loan payments and access to loan forgiveness unnecessarily. Even after the Department decided to resume processing IDR plan applications, it was unclear they would resume processing PSLF applications for PAYE and ICR, which they claimed were blocked by the court’s injunction. In a surprising turn of events, however, the AFT and Dept. of Ed. have come to an agreement to resume processing of PSLF applications for PAYE and ICR borrowers.
As borrowers grapple with the shifting landscape of student loans after the 2025 budget bill, the restoration of PAYE and ICR gives much-needed stability as we wait for other payment plan changes. Although the Repayment Assistance Plan (RAP) has been announced, as well as significant changes to IBR, they have yet to take effect and may not until mid-2026. Meanwhile, Congress eliminated most of the IDR plans, leaving borrowers unsure how they could continue to qualify for PSLF and still afford their monthly payments. This agreement with the AFT confirms that PAYE and ICR will remain until July of 2028 and will continue to qualify for PSLF until they are sunsetted.
If you have a PAYE or ICR plan and expect to be in repayment after July, 2028, give us a call. We can help you decide which plan works best for you after those plans are retired, and help you know exactly when’s the best time to switch.
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