Navigating Student Loan Repayment Changes: What HR Professionals Need to Know

Recent federal actions have created significant shifts in student loan repayment policies, affecting both employees and the organizations that support them. As HR professionals work to guide their workforce through these changes, it is essential to stay informed and proactive.

U.S. Department of Education Suspends Income-Driven Repayment Plans:

The U.S. Department of Education recently stopped accepting and processing applications for all income-driven repayment plans: Income-Contingent Repayment, Pay as You Earn, Income-Based Repayment, and Saving on a Valuable Education (also known as SAVE). The move came after the 8th U.S. Circuit Court of Appeals expanded an injunction blocking then-President Joe Biden’s SAVE program.

Income-driven plans cap monthly bills at a percentage of a borrower’s earnings and extend repayment periods from the standard 10 years to as long as 25 years, with the promise of forgiving the balance at the end of that term. The court said that loan forgiveness was not authorized in a 1993 law, which requires the Education secretary to offer repayment plans tied to a borrower’s income and cap repayment at no more than 25 years.

People who are already repaying their loans through an income-driven repayment plan and need to recertify their earnings to remain enrolled are barred from doing so for now, and the Education Department has yet to say whether they will receive an extension. Without one, those borrowers will see their payments significantly increase as they are placed back into the standard 10-year plan.

Public Service Loan Forgiveness Program Review

The president signed an executive order modifying the Public Service Loan Forgiveness (PSLF) program. The order redefines eligibility criteria, excluding organizations that engage in activities deemed to have a “substantial illegal purpose.” The administration argues these changes are necessary to realign PSLF with its original intent and ensure taxpayer funds are not used to support organizations that may conflict with national security or legal compliance.

This revision of PSLF eligibility could have far-reaching effects on nonprofit and government employees who have structured their careers around the promise of loan forgiveness after ten years of qualifying payments. The order’s broad language introduces uncertainty regarding which organizations may be affected, potentially leading to stricter scrutiny of PSLF applications. Employees in public service roles should closely monitor any further guidance from the Department of Education to understand how their eligibility might be impacted.

As these policy changes continue to unfold, staying engaged and informed will be crucial in understanding the shifting student loan landscape and providing the best possible guidance to those affected.