UPDATE: The Trump administration has just announced student-loan forgiveness for select borrowers under income-based repayment plans. This development is crucial for many, as eligible borrowers could see significant debt relief in the coming months.
Eligible borrowers have started receiving emails indicating that their loans will be discharged soon. However, the ongoing government shutdown could lead to potential delays in processing these applications. As of now, approximately 2 million borrowers are enrolled in income-based repayment plans, and many are eagerly awaiting this long-awaited relief.
The Department of Education confirmed that the discharge process is underway, but stressed that it may take some time for loan servicers to update accounts. Most borrowers can expect their discharge processed within two weeks, but delays are possible.
The income-based repayment (IBR) plans allow borrowers to pay based on their income, with the promise of forgiveness of any remaining debt after either 20 or 25 years of payments. The emails sent out recently specify that borrowers will receive notifications from their loan servicers once the discharge has been processed.
Significantly, the government shutdown, which began on October 1, 2025, has affected federal agencies, including the Department of Education. A notice on the Federal Student Aid website warns that “information on this website may not be maintained, and inquiries may not receive a response.” Borrowers are advised to continue making their scheduled payments during this period.
As of October 21, 2025, the Department of Education will send discharge information to servicers. Borrowers have until this date to opt out of relief if they choose. Unfortunately, with many staff members furloughed or terminated, processing delays are likely, adding uncertainty to the timeline for relief.
Delays in processing could have tax implications, as a provision in the American Rescue Plan made student-loan forgiveness tax-free until 2025. After January 1, 2026, borrowers who receive relief may face significant tax bills. The urgency of this situation is palpable, as many borrowers are hoping for relief before the tax deadline.
Additionally, the American Federation of Teachers (AFT) is actively involved in ongoing litigation related to the processing backlog of Public Service Loan Forgiveness applications. The judge overseeing this case recently indicated that briefings would pause due to the government shutdown. However, a joint status report filed on October 17, 2025, between AFT and the Department of Education stated that the effective date for loan discharge eligibility will be recognized, which may prevent borrowers from incurring tax liabilities.
As this situation develops, borrowers should stay informed about their eligibility and the potential impact of the ongoing government shutdown on their loan forgiveness applications. This urgent announcement marks a significant moment for many struggling with student debt, and the impact is expected to be felt across the nation.
Stay tuned for more updates on this critical issue affecting millions of borrowers. Share this news with anyone who might be impacted!
