Student Loan System Faces Technical Issues and Misinformation Ahead of July 1 Changes Under New Tax Bill

Millions of federal student loan borrowers are navigating a critical transition period as the U.S. Department of Education implements major policy shifts under the “one big beautiful bill” tax-and-spending package, effective July 1. These changes include the termination of the Biden-era SAVE repayment plan, requiring nearly 7 million borrowers to transition to alternative options. However, advocates report significant obstacles, including system malfunctions and conflicting information, complicating the process.

Carolina Rodriguez, director of the Education Debt Consumer Assistance Program, described the challenges as making the system “even more unmanageable,” disproportionately affecting borrowers. Former Education Department official Rich Williams highlighted resource constraints, citing staffing cuts under the Trump administration as a key factor in the department’s struggle to manage complex updates under tight deadlines.

At least 42 million Americans hold federal student loans, with total debt surpassing $1.6 trillion, according to the Congressional Research Service. Issues include PAYE (Pay As You Earn) plan availability problems, where eligible borrowers report the option not appearing in applications. Missing PAYE enrollment could force borrowers into higher-cost repayment plans like IBR, which requires 15% of discretionary income for pre-2014 loans versus 10% under PAYE.

Borrowers are also receiving inconsistent IBR payment estimates. Rodriguez noted cases where individuals earning $60,000, $75,000, and $265,000 were all quoted the same $50 monthly payment, which lacks logical basis and risks financial strain. Additionally, some borrowers are erroneously advised to consolidate loans, potentially jeopardizing progress toward debt forgiveness and restricting future repayment plan access.

And the one application they all need is broken.

Carolina Rodriguez

director of EDCAP

Education Department spokesperson Ellen Keast acknowledged ongoing efforts to meet the July 1 deadline but did not address specific technical concerns. With over 600,000 pending repayment applications and SAVE borrowers facing staggered transition deadlines, advocates warn of systemic risks as borrowers scramble to adapt to new requirements.

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