Many student loan borrowers have hit a repayment obstacle: The U.S. Department of Education denied their application to switch into a new payment plan.
The department rejected 327,955 borrower requests to be enrolled in an income-driven repayment plan in August alone, according to a Dec. 15 court filing.
The denials mean many of these borrowers may remain stuck in their prior repayment plan with a higher monthly payment, or in an interest-accruing forbearance. As of the end of November, another 802,730 IDR plan applications remain pending with the Education Department.
Millions of student loan holders rely on IDR plans to afford their payments and eventually, to emerge from their debt. The plans cap borrowers’ monthly bills at a share of their discretionary income, and lead to debt cancellation after a certain period, typically 20 years or 25 years. Those pursuing the popular Public Service Loan Forgiveness program, which leads to debt erasure for public servants after a decade, also typically need to be enrolled in an IDR plan.
Consumer advocates said they were alarmed by the number of denials.
