UPDATE: The U.S. Department of Education has just announced the resumption of student-loan forgiveness processing for 2 million borrowers on income-based repayment plans, effective immediately. Eligible individuals received emails notifying them that their loan relief will be processed “over the next several months,” marking a critical shift after months of pause.
This urgent development comes as the department seeks to address the needs of borrowers who have met their payment thresholds for forgiveness. The emails, reviewed by Business Insider, contain the subject line: “You’re eligible to have your student loan(s) discharged,” and emphasize the importance of acting quickly. Borrowers have until October 21, 2023, to opt out of this relief if they choose to do so.
Income-based repayment plans were designed to make student loan payments manageable, linking them to borrowers’ income levels, with the promise of full forgiveness after 20 or 25 years. As of the second quarter of 2025, approximately 2 million borrowers are enrolled in these plans, according to Federal Student Aid data.
The Education Department had previously paused relief processing since July to ensure accurate payment counts. The email to borrowers clarifies that while the discharge process may take time, most borrowers can expect their discharges to be processed within two weeks. However, some may experience longer wait times.
It’s important to note that those who decide to opt out of the relief must continue making payments on their loans. This option may be considered to avoid potential state tax implications. The department has indicated that any borrower interested in opting out should contact their loan servicer before the deadline.
There is an added sense of urgency as the American Rescue Plan provision, which allows for tax-free forgiveness, is set to expire at the end of the year. Borrowers receiving debt relief after January 1, 2026, could face significant tax bills potentially amounting to thousands of dollars. The American Federation of Teachers has recently filed a complaint urging the department to expedite loan cancellations for those who have already met their payment thresholds before this tax liability kicks in.
While the resumption of income-based repayment relief is a positive development, the Trump administration is simultaneously pursuing changes that could limit future forgiveness options. The Department of Education has recently concluded its first week of negotiations regarding proposed repayment changes that include eliminating existing income-driven repayment plans in favor of two less favorable alternatives.
James Bergeron, acting head of Federal Student Aid, stated, “Unlike the previous Administration’s focus on loan forgiveness, the Trump Administration is taking action to implement meaningful and necessary enhancements to the way student loans are serviced to better serve borrowers and American taxpayers.” This shift in focus comes as the department recommences collections on defaulted student loans after a five-year hiatus.
As the situation develops, borrowers are encouraged to stay informed about their options and the potential impacts of these changes on their financial futures. The urgency of securing relief before the year’s end cannot be overstated, as many are relying on this assistance to alleviate their financial burdens.
Stay tuned for more updates on this critical issue as we continue to monitor the situation.