Resolution to Ongoing IDR and PSLF Buyback Backlog Advances
By Hugh T. Ferguson, NASFAA Managing Editor
The ongoing legal challenge to the Department of Education’s (ED) backlog of pending income-driven repayment (IDR) and Public Service Loan Forgiveness (PSLF) Buyback program applications has reached an agreement, pending final court approval, that will offer more borrowers a pathway to forgiveness and ensure that eligible applicants are not subject to a tax bill due to processing delays.
According to the agreement in the months-long lawsuit from the American Federation of Teachers (AFT), ED will continue processing loan applications for eligible borrowers under the Income-Based Repayment (IBR) plan.
ED has also agreed not to deny a borrower as ineligible for applying to any IBR plan on the grounds that they lack a “partial financial hardship.” Those applications will be held “in abeyance” until ED is able to update its systems to properly process those applications. The department will also include a notice on Studentaid.gov telling borrowers to reapply if they were denied on the basis that they lacked a partial financial hardship.
“We welcome the outlined steps to expedite the processing of income-driven repayment and PSLF Buyback applications, alongside the commitment to address time-based income-driven repayment forgiveness,” said Megan Walter, NASFAA Senior Policy Analyst. “While we look forward to final judicial approval, this order will hopefully offer resolution for individuals, some who have been waiting for completed processing for over a year.”
ED will also continue processing loan applications for the Income Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans as long as these plans are in effect, as well as process PSLF Buyback applications.
The effective date of a loan discharge will be the date by which a borrower becomes eligible to have their loans canceled under IBR, Original ICR, or PAYE plans. This internal tracking by ED will prevent certain borrowers with backlogged applications from being subject to a federal tax bill in 2026 when a provision of the American Rescue Plan (ARP) is set to expire.
“Crucially, the provision to shield borrowers from tax implications stemming from administrative backlogs is a significant positive,” Walter said.
Borrowers will also be reimbursed for any payments on a qualifying loan through an Income-Driven Repayment (IDR) plan – IBR, Original ICR, and PAYE – that were made after their final payment that qualified them for discharge.
As a part of the agreement, AFT acknowledged that the IRS and the U.S. Department of the Treasury, and not ED, have the final say as to whether the department’s student loan cancellations qualify as taxable income under ARP.
The ruling also required another six status reports with further details on the number of pending and outstanding applications. These reports will resume 30 days after the ongoing lapse in appropriations – prompting a government shutdown – is resolved, with subsequent reports being provided every 30 days thereafter. After the sixth filing, the parties will determine whether more reports are needed.
In the first status report, ED will also explain the methods used to identify borrowers whose loans are eligible for discharge under IDR plans, as well as the number of borrowers who were denied under IBR on or after July 4, 2025, on the grounds that they lacked financial hardship.
Publication Date: 10/21/2025
Paula G | 10/21/2025 4:34:01 PM
"Borrowers will also be reimbursed for any payments on a qualifying loan through an Income-Driven Repayment (IDR) plan – IBR, Original ICR, and PAYE – that were made after their final payment that qualified them for discharge."
I know of several people that got PSLF under the Temporary Expanded Public Service Loan Forgiveness (TEPSLF). They had continued to pay during Covid, they have yet to get the overpayments and the payments paid during Covid returned. Is there any known resource we can give them?
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