Court documents dated December 15 revealed that the U.S. Department of Education rejected more than 327,000 applications from borrowers who sought to enroll in income-driven repayment (IDR) plans in August alone. This has left hundreds of thousands of Americans stuck in their previous repayment plans—often facing higher monthly payments or continued interest accumulation.
According to Newsweek, this development comes at a time when more than 42 million Americans hold student loan debt totaling over $1.6 trillion, while more than 800,000 additional IDR applications remained under review as of November.
Experts Warn of Administrative Failures as Millions Face Renewed Student Loan Collection
Income-driven repayment plans are considered a financial lifeline for millions of borrowers, as they calculate monthly payments based on discretionary income and offer loan forgiveness after 20 or 25 years. However, the Department of Education stated in its court filing that the rejections were due to “unexpected ambiguity” in plan selection. Many borrowers requested placement in the plan with the “lowest monthly payment,” but internal calculations showed that multiple plans resulted in the same payment amount.
Education and economic experts criticized the policy, describing it as evidence of administrative dysfunction. Alex Bean, a financial literacy professor at the University of Tennessee, said the rejections came at a time when borrowers already feel they have limited options, adding that many applications were denied for purely technical reasons.
The court filing also noted that more than 5 million borrowers are currently delinquent, with wage garnishment expected to resume in January. Under federal law, the government may seize up to 15% of a borrower’s disposable income to repay student loan debt.
Experts advise borrowers whose applications were denied to reapply through StudentAid.gov, emphasizing that time is critical to reducing monthly payment burdens before forced collection measures begin.