Recent Updates on Income-Based Repayment (IBR) and Student Loan Forgiveness

The landscape of student loan repayment and forgiveness, particularly under the Income-Based Repayment (IBR) plan, has seen significant changes in 2025. These updates, driven by legislative shifts, court rulings, and administrative actions, have reshaped options for borrowers seeking affordable payments and eventual loan forgiveness. This article provides a comprehensive overview of the latest developments, eligibility criteria, and implications for borrowers under the IBR plan, drawing on recent sources for accuracy.

Background on Income-Based Repayment (IBR)

The IBR plan is one of several income-driven repayment (IDR) plans designed to make federal student loan payments more manageable by tying monthly payments to a borrower’s income and family size. Typically, IBR caps payments at 10% or 15% of discretionary income, depending on when the loan was taken out, and offers forgiveness of any remaining balance after 20 or 25 years of qualifying payments. Unlike standard repayment plans, which require fixed payments over 10 years, IBR provides flexibility for borrowers with lower incomes, potentially reducing payments to as low as $0 while still counting toward forgiveness.

Key Updates to IBR and Student Loan Forgiveness in 2025

1. Suspension of IBR Forgiveness Processing

As of July 2025, the U.S. Department of Education has temporarily suspended student loan forgiveness under the IBR plan due to system updates. This pause affects borrowers who may have reached the 20- or 25-year repayment milestone required for forgiveness. The suspension adds to the complexity of navigating repayment options, as borrowers expecting forgiveness may face delays. Posts on X indicate this is part of broader disruptions in IDR processing, with some describing the situation as a “messy moment” for borrowers.

2. Elimination of Partial Financial Hardship Requirement

The One Big Beautiful Bill Act (OBBB), signed into law by President Trump on July 4, 2025, has removed the requirement for borrowers to demonstrate a partial financial hardship to enroll in IBR. Previously, eligibility for IBR required that a borrower’s standard 10-year repayment plan payment exceed the IBR-calculated payment.

This change, effective immediately, expands access to IBR for borrowers with loans originated on or after July 1, 2014, and before July 1, 2026. These borrowers can now enroll in IBR, which requires payments of 10% of discretionary income over 20 years, with any remaining balance forgiven. This is a significant shift from the Income-Contingent Repayment (ICR) plan, which requires 20% of discretionary income and forgiveness after 25 years.

3. Inclusion of Consolidation Loans for Parent PLUS Borrowers

The OBBB also allows borrowers with consolidation loans that repaid a Parent PLUS loan to enroll in IBR, effective upon enactment. This change broadens eligibility for IBR, enabling more borrowers to benefit from lower payments and potential forgiveness. The Department of Education is working with loan servicers to implement this provision, with updates expected on StudentAid.gov.

4. One-Time IDR Account Adjustment

In April 2022, the Department of Education announced a one-time account adjustment to address historical inaccuracies in tracking qualifying payments for IDR forgiveness. This adjustment credits borrowers for months spent in repayment, certain deferment periods (prior to 2013), and some forbearance periods toward the 20- or 25-year forgiveness timeline.

Borrowers with Direct Loans or federally managed FFELP loans who have reached these milestones may see automatic forgiveness, while those with commercially held FFELP or Perkins loans must consolidate into Direct Loans by June 30, 2024, to benefit. This adjustment has already resulted in significant relief, with $4.9 billion in debt cancellation approved for 73,600 borrowers as of January 2024. However, borrowers should verify their payment counts on StudentAid.gov and contact the FSA Ombudsman if discrepancies arise.

5. Overhaul of Repayment Options

The OBBB introduces a new Repayment Assistance Plan (RAP) effective by July 1, 2026, which will replace most existing IDR plans, including the Saving on a Valuable Education (SAVE) plan, for new borrowers. Current borrowers will retain access to IBR and other older plans, but new borrowers will be limited to RAP or a standard repayment plan.

RAP ties payments to adjusted gross income (AGI), ranging from $10 monthly for those earning $10,000 or less to 10% of AGI for those earning $100,000 or more. Forgiveness under RAP is extended to 30 years (360 qualifying payments), compared to 20 or 25 years under IBR. Current borrowers nearing forgiveness may prefer IBR to avoid the longer RAP timeline.

6. Legal Challenges to IDR Plans

Court rulings in 2024 and 2025 have disrupted IDR plans, particularly the SAVE plan, which was deemed unlawful by the Eighth Circuit Court of Appeals in February 2025. As a result, SAVE borrowers are in a general forbearance with no payments due, but interest will accrue starting August 1, 2025.

Forgiveness under SAVE, Pay As You Earn (PAYE), and ICR is currently blocked by court injunctions, though IBR forgiveness remains active, albeit paused for system updates. Borrowers in SAVE can switch to IBR to continue earning credit toward forgiveness, but processing delays may place them in a temporary forbearance (up to 60 days) that counts toward forgiveness.

7. Processing Delays and Application Backlog

A backlog of over 1.5 million IDR applications, reported as of June 30, 2025, has created significant delays for borrowers seeking to enroll or recertify in IBR and other IDR plans. The Department of Education resumed processing in March 2025 after a pause initiated by the Biden administration, but challenges persist due to reduced staffing and legal complexities. Borrowers are encouraged to apply online via StudentAid.gov and consent to IRS data-sharing for faster processing and automatic annual recertification.

8. Implications for Public Service Loan Forgiveness (PSLF)

IBR remains an eligible repayment plan for PSLF, which offers forgiveness after 10 years of qualifying payments for borrowers working full-time in public service roles. The OBBB ensures that payments made under RAP will also count toward PSLF, effective upon its launch by July 1, 2026. However, SAVE forbearance does not count toward PSLF, prompting borrowers to switch to IBR or other IDR plans to continue progress. Borrowers can track qualifying payments on StudentAid.gov and should submit PSLF forms annually to verify employer eligibility.

Implications for Borrowers

These updates present both opportunities and challenges. The removal of the partial financial hardship requirement and expanded eligibility for Parent PLUS consolidation loans make IBR more accessible. The one-time account adjustment has accelerated forgiveness for some, but the suspension of IBR forgiveness processing and application backlogs may delay relief.

The shift to RAP for new borrowers signals a longer path to forgiveness, making IBR a critical option for current borrowers nearing the 20- or 25-year mark. Legal challenges and the phase-out of SAVE, PAYE, and ICR add uncertainty, particularly for borrowers with graduate school debt, who may face higher payments under IBR (15% of discretionary income) compared to SAVE (5% for undergraduate loans).

Recommendations for Borrowers

1. Check Your Status: Log into StudentAid.gov to review your loan details, qualifying payment counts, and IDR eligibility. Use the Loan Simulator to compare repayment plans and estimate payments.
2. Apply or Recertify Promptly: Submit IBR applications online and consent to IRS data-sharing to streamline processing. Set reminders for annual recertification to avoid defaulting to a standard plan.
3. Consolidate if Necessary: Borrowers with FFELP or Perkins loans should consolidate into Direct Loans to benefit from the one-time adjustment, noting that post-February 2025 consolidations reset the forgiveness clock.
4. Monitor Legal Developments: Stay updated via StudentAid.gov/courtactions for changes to IBR and other IDR plans, as court rulings may further impact forgiveness.
5. Pursue PSLF if Eligible: Public service workers should enroll in IBR and submit PSLF forms annually to track progress toward 10-year forgiveness.
6. Avoid Scams: Never pay for loan forgiveness assistance, as legitimate programs are free through the Department of Education.

Conclusion

The IBR plan remains a cornerstone of federal student loan repayment, offering affordable payments and a path to forgiveness for eligible borrowers. However, 2025 has brought significant changes, including expanded eligibility, a temporary halt in forgiveness processing, and the introduction of RAP as a future replacement for most IDR plans.

Borrowers must navigate these changes proactively, leveraging tools like StudentAid.gov and staying informed about legal and legislative developments. While the system is in flux, IBR continues to provide a viable option for managing student debt, particularly for those close to forgiveness or pursuing PSLF. By staying engaged and informed, borrowers can maximize their benefits under this evolving framework.