Student loan borrowers are encountering technical glitches and misinformation in the weeks before sweeping July 1 changes to the federal loan system take effect, according to advocates and experts working with borrowers. Over 42 million Americans hold federal student loans totaling more than $1.6 trillion, and the glitches are hitting the system just as nearly 7 million borrowers must exit the defunct SAVE repayment plan and choose a new option.
Organizations assisting borrowers report that some eligible borrowers cannot see the PAYE (Pay As You Earn) repayment plan as an available option, even though PAYE should remain accessible to those with loans taken out before July 1, 2026. “Borrowers have come to us reporting that PAYE isn’t appearing as an option,” said Rich Williams, former deputy assistant secretary at the Education Department and chief customer officer at Summer, a loan guidance company. “Some borrowers are eligible for PAYE, and it is not displaying it,” added Carolina Rodriguez, director of the Education Debt Consumer Assistance Program in New York.
The consequences of missing PAYE enrollment are significant. Borrowers unaware of or unable to access PAYE could end up on Income-Based Repayment (IBR), where those with pre-July 2014 loans pay 15 percent of discretionary income monthly, compared to just 10 percent under PAYE. This difference could translate to hundreds or thousands of dollars in additional annual payments.
Beyond missing repayment options, the application for income-driven plans is displaying incorrect payment estimates. Rodriguez reported that clients with vastly different incomes—$60,000, $75,000, and $265,000—are all being told their monthly IBR payment will be $50. “There is zero logic to that payment amount,” she said. Borrowers enrolling based on these incorrect estimates could discover they cannot afford their actual payments once the estimates are corrected.
Some borrowers are also receiving misleading guidance to consolidate their loans, according to Betsy Mayotte, president of The Institute of Student Loan Advisors. Consolidating could cause borrowers to lose progress toward debt forgiveness under income-driven repayment plans. Those who consolidate after July 1 will also lose access to several repayment plans under the new rules.
The Trump administration’s staffing cuts at the Education Department are contributing to the operational strain. Nearly half of the department’s staff was terminated last year, removing many who assisted borrowers. “The Department is executing significant, complicated repayment changes on tight deadlines, with new plans and increasingly important fine print,” Williams said. “That would be a major challenge for even a well-resourced agency.”
A backlog of applications already burdens the system. More than 500,000 student loan borrowers are waiting to enter a new repayment plan, according to a recent court filing. Meanwhile, the Education Department has set deadlines for the nearly 7 million SAVE borrowers to move into a different repayment option, with the Trump administration indicating it will give them roughly 90 days from July 1 to select a plan.
Servicing problems in the student loan system are not new. A November 2024 Consumer Financial Protection Bureau report analyzed over 18,000 consumer complaints and found that servicer errors with billing, customer service failures, and incorrect repayment plan processing have caused borrowers to pay inflated amounts. When similar transitions occurred in the past, such as when payment resumption began in October 2023 after the pandemic pause, borrowers faced missed payments, inaccurate statements, and processing delays.
The Education Department said in a statement that it “has been, and continues to be, working toward a July 1 implementation, and we expect to meet that launch date,” but did not address the specific technical issues advocates reported.
Sources
- CNBC — reported on technical glitches and misinformation facing borrowers before July 1 changes, including PAYE not displaying, incorrect payment estimates, and misleading consolidation guidance; cited staffing cuts at the Education Department and backlog of 500,000+ borrowers
- Congressional Research Service — provided data that over 42 million Americans hold federal student loans exceeding $1.6 trillion
- Consumer Financial Protection Bureau — analyzed 18,000+ consumer complaints about servicer errors in November 2024 report
- U.S. Department of Education — provided statement on July 1 implementation timeline
