Student-loan borrowers can again apply for affordable payments.

The Trump administration had initially taken down applications for these plans after a federal appeals court blocked the government from moving forward with SAVE, a Biden-era version of income-driven repayment. But this month, the American Federation of Teachers sued, accusing the Trump administration of illegally blocking borrowers from signing up for these plans, which are often their most affordable option.

That left borrowers with little recourse in cases where their monthly payments jumped or their financial circumstances had changed, according to borrower advocates and the lawsuit. It also made it difficult for many borrowers to make progress towards cancellation under programs like Public Service Loan Forgiveness, which allow borrowers who work for the government or a nonprofit to have their debt cancelled after 10 years of payments. Three-quarters of AFT’s members work in occupations that are eligible for this program, according to the complaint.

James Bergeron, the acting undersecretary of education, touted the Trump administration’s work on the issue in a press release, saying “our team was able to relaunch this application within weeks, ensuring borrowers have access and the ability to access all legal repayment plans.” Still, advocates like Yu say that if the applications aren’t processed in a timely manner, borrowers will still be blocked from making affordable payments.

How are you managing your student-loan payments? We want to hear from you: Email jberman@marketwatch.com. 

The back-and-forth over the applications comes as the Federal Reserve Bank of New York is warning that nearly 10 million student-loan borrowers could face a drop in their credit scores in the coming months because of missed payments. Income-driven repayment plans are meant to help borrowers facing high monthly payments stay current on their loans and avoid financial consequences that come with missing a monthly bill.

Meanwhile, borrowers and advocates are also watching to see how the Trump administration’s push to dismantle the Education Department will impact customer service for student-loan borrowers and their ability to access benefits of programs like these plans.

“The bottom line is that borrowers do have rights,” said Yu, who is one of the attorneys representing the AFT in the suit. “Part of what this exercise is about is making sure that borrowers are getting those rights. We’re not going to let those rights evaporate without a fight.”

Here’s what borrowers need to know:

If your monthly payment is unaffordable, fill out the application

Income-driven repayment plans offer student-loan borrowers the ability to pay their debt as a percentage of their income and have the remainder cancelled after a certain number of years of payments.

For borrowers who have a monthly student-loan bill they can’t afford, the opening of the application should help, Yu said. In addition, borrowers who are hoping to have their debt eventually cancelled through income-driven repayment or PSLF should fill the application out.

Borrowers who are already on the plans, but need to make changes to their income or family size to qualify for a different monthly payment, can also now do so, said Scott Buchanan, the executive director of the Student Loan Servicing Alliance, a trade group representing student-loan servicers.

Borrowers on income-driven repayment plans are expected to recertify their income each year. Some borrowers who saw their monthly payment amounts jump because they were due to recertify their income on IDR plans after the appeals-court decision can expect their payments to revert back to what they were before, said Betsy Mayotte, the president of the Institute for Student Loan Advisors, who works with borrowers resolving student-loan issues. In addition, they should see their recertification dates pushed forward.

“If it wasn’t extended today, don’t call your servicer,” Mayotte said. “That’s just going to plug up the lines. Expect it to take a few weeks or even a month.”

But borrowers who were due to recertify before the injunction, yet still haven’t done so, should recertify, she said.

Pay close attention to your application and be in touch with your servicer

Under normal circumstances, when a borrower applies for one of these plans, the borrower’s servicer would put them into a processing forbearance. That forbearance pauses their bill while the servicer takes the steps necessary to enroll them in the plan.

The Education Department didn’t immediately clarify whether that will still take place or if a pause on processing the applications means a pause on putting them in a processing forbearance as well. Buchanan of the Student Loan Servicing Alliance said his members expect to hear in the coming days from the department about how to address the applications.

Regardless, given the confusion and back-and-forth surrounding the status of IDR, Yu said borrowers should screenshot and document their application and get in touch with their servicer to let them know they applied so they can try to get into a processing forbearance as soon as possible.

Borrowers who have a payment due in the next few days should make the monthly payment, Buchanan said. If they can’t afford the payment, borrowers should call their servicer, tell them they submitted the application and ask for a deferment, forbearance or any other option that might help them avoid delinquency.

“Don’t just assume because you submitted it that everything has already been changed,” Buchanan said. “It will take some time.”

There is already a 1 million IDR application backlog, so getting an answer could take a while

Even before the Education Department took the IDR application offline, more than 1 million IDR applications were waiting to be processed, according to a letter from several Democratic senators to Education Secretary Linda McMahon.

“This is a real concern,” Yu said of the backlog. “The administration needs to take proactive steps to protect borrowers’ rights. Their right is not just to apply for a thing — it is to be in a thing.”

Buchanan said every time there is a disruption in day-to-day operations like this, there’s going to be “a slight bottleneck.”

“There certainly will be some backlog that needs to be worked through,” Buchanan said, adding that he expects borrowers will be held harmless because they’ll be put in some kind of forbearance.

Will this help stave off delinquency, credit-score drops, and defaults?

“Turning on applications and then having them go into a black box that nobody sees will certainly not automatically help with that problem,” Yu said of concerns over borrowers’ facing financial consequences from falling behind on their loans.

If borrowers who apply for IDR are put into a processing forbearance, they should be protected from the consequences of nonpayment, Yu said. Still, it’s too early to know what steps the Education Department plans to take between now and when they start processing applications, she said.

“This is one of the big outstanding questions that we have, is what are they going to do with them,” Yu said of the applications, “and what is the timeline?”

“If this goes on for months, you could have people have credit damage in the interim or people just make payments that they can’t afford,” she said. “This is one of the reasons why we’re seeking judicial intervention here.”

The future of income-driven repayment is still murky

Borrowers have had access to income-driven repayment since the early 1990s, but only in recent years has it become particularly politicized. When the plans were first created, they were envisioned as a sort of insurance policy against bad luck. But in the past several years, a large share of borrowers have come to rely on them — about 47% of student-loan dollars are in income-driven repayment plans — which have made them a target of critics concerned about the cost of the student-loan program to taxpayers.

In addition, the Biden administration’s efforts to reform income-driven repayment through SAVE faced challenges from Republican-led states in court.

The opening of the application doesn’t provide much insight into the Trump administration’s approach to income-driven repayment going forward. Congressional Republicans have said they’d like to create their own version of the plans that are less generous to borrowers, though it’s unclear whether those plans will come to fruition.

“Congress created these programs to ensure that borrowers have a pathway to repay their debt and to get out of debt,” Yu said. “The courts and the administration need to ensure that borrowers get those rights.”