Trump administration pauses IBR Student Loan Forgiveness Plan. What does it mean and who will be most affected?

US President Donald Trump's team on Monday paused Student Loan Forgiveness under Income-Based Repayment (IBR) plan. It was the only remaining plan that was not subject to any court injunction or legal challenge. 

The Department of Education, currently headed by WWE co-founder Linda McMahon, ordered the plan to be paused on Monday. “Currently, IBR forgiveness is paused while our systems are updated,” the department said in its updated guidance on pending court challenges. 

“IBR forgiveness will resume once those updates are completed,” it added.

What is IBR and how does it work?

In the plan, student loan forgiveness is calculated on the basis of the borrower's income and the family size.

The formula calculates the amount a borrower has to pay every month.

In this education loan repayment plan, monthly instalment payments are equal to 15 per cent of the borrower's discretionary income, divided by 12.

The borrower needs to make a 10 per cent payment if they are a new borrower on or after July 1, 2014. 

Borrowers who do not repay student loans by the end of their term—which is 25 years for borrowings taken before July 1, 2014, and 20 years for the borrowed amount after that—would then be entitled to the loan forgiveness.

Who will be affected the most after the IBR plan pause?

Borrowers who are already under the plan or about to enrol in the plan are most likely to suffer.

Students who rely on IBR's income-driven repayment structure for lower monthly payments and later loan forgiveness will have to look for other alternatives. 

Why did Trump administration discontinue IBR?

The Trump administration didn't provide any strong explanation while discontinuing this programme. 

The education department said that IBR was paused 'while our systems are updated to accurately count months not affected by the court’s injunction', referring to the SAVE plan.

Other plans that Trump administration has paused

Pay As You Earn (PAYE) Plan, Saving on a Valuable Education (SAVE) Plan, and Income-Contingent Repayment (ICR) Plan are some other plans that have been paused by the Trump administration.