### Federal Student Loan System Faces Unprecedented Challenges: Millions of Borrowers Impacted

In recent weeks, significant developments in the federal student loan system have affected over 40 million borrowers in transformative ways. Critical updates from court rulings, legislative processes, and regulatory changes are reshaping everything from loan disbursement to repayment and forgiveness.

The federal student loan repayment structure is experiencing turmoil like never before. Eight million borrowers enrolled in the Biden administration’s SAVE plan, an income-driven repayment program, are currently in forbearance due to ongoing legal disputes. While their balances are not accruing interest, they are unable to make progress toward student loan forgiveness via income-driven plans and the Public Service Loan Forgiveness (PSLF) program.

Complicating matters further, the Trump administration had halted the entire income-driven repayment application system earlier this year following a legal ruling against the SAVE plan. Although application processing resumed in April, more than 1.9 million applications remain unprocessed, with less than 80,000 adjudicated last month. This backlog means numerous borrowers cannot alter their repayment plans or recalculate monthly payments, as mandated by federal law.

Loan servicers are reportedly giving priority to single student loan borrowers due to simpler processing requirements. However, the slow pace of processing has left uncertain how quickly the Department of Education can address the backlog, with another status report on the situation expected soon.

Additionally, the Department of Education has processed only a fraction of the over 50,000 PSLF Buyback applications. This program aims to allow borrowers to receive credit towards loan forgiveness for periods of deferment and forbearances. However, with less than 2,000 applications processed, many beneficiaries seeking discharge through PSLF Buyback find themselves at an impasse.

Meanwhile, House Republicans recently passed the "One Big Beautiful Bill Act," a sweeping legislative measure designed to overhaul federal student aid. The act seeks to phase out the Graduate PLUS and Parent PLUS programs, which could push families towards riskier private loans. The legislation would also repeal popular repayment plans like SAVE, ICR, PAYE, and introduce a new plan that extends the repayment term by an additional 5 to 10 years.

In parallel, Trump administration officials at the Department of Education are implementing regulatory changes to student loan forgiveness and repayment programs. Targeted programs include PSLF, PAYE, and ICR plans, though specific changes are undisclosed. These efforts coincide with resumed collection actions against defaulted federal student loan borrowers, suspended during the pandemic. Notices about the Treasury Offset program, enabling wage garnishment and tax refund interception, have already been sent to millions of defaulters, potentially affecting over five million borrowers.

As legislative and administrative actions unfold, advocacy groups express concerns that many borrowers will face significant financial consequences amid the system's current disarray.