Student loans forgiveness is again at the center of national attention as the U.S. Department of Education moves to resume discharges for certain borrowers and retools related policies. After months of uncertainty and legal challenges, key relief is moving forward—though risks and restrictions remain. Here’s a detailed, up-to-date look at where things stand as of October 2025.
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Forgiveness Resumes Under IBR for Millions
In October 2025, the Department of Education began notifying around 2 million borrowers enrolled in Income-Based Repayment (IBR) plans that they qualify for student loans forgiveness of their remaining balances. Many of these notices came via email with a subject line like “You’re eligible to have your student loan(s) discharged.”
Those who do not want their loans forgiven can opt out by October 21, 2025. After that date, servicers are expected to process discharges over the following weeks.
This restart follows a pause beginning in July, during which the Department reviewed and verified payment histories, in part due to court orders and data adjustments.
Importantly, any forgiveness granted in 2025 remains exempt from federal income tax—thanks to a provision in the 2021 American Rescue Plan. But that tax benefit is set to expire at the end of 2025, meaning discharges processed in 2026 and beyond may be treated as taxable income unless Congress acts.
Why the Pause Happened & What Changed
The suspension of discharges under IBR came amid legal challenges to newer income-driven plans—especially the SAVE plan—and questions about the Department’s authority. A federal appeals court blocked the implementation of expansive forgiveness under SAVE, forcing the Department to halt processing across multiple plans.
IBR is distinct because it is codified by Congress as a statutory plan, which allowed the Department to resume forgiveness under IBR even with litigation affecting other plans. Still, the pause required the Department to revalidate tens of millions of payment records—an effort completed in late 2024, with updated counts visible as of January 2025.
Even though the SAVE plan is blocked for now, the Department still cannot process forgiveness under it due to the court injunction. Borrowers who were in SAVE or other IDR plans now must rely on IBR for future forgiveness eligibility.
PSLF and Other Programs: Under Pressure
While IBR relief is restarting, other forgiveness paths remain under threat or in flux.
- The Department has issued a Notice of Proposed Rulemaking (NPRM) for Public Service Loan Forgiveness (PSLF) that would deny forgiveness to employees of organizations engaged in a “substantial illegal purpose.” This could disqualify borrowers working for nonprofits or public entities if alleged misconduct surfaces.
- Higher education and nonprofit associations have raised strong objections, warning that the rule gives the Department overly broad authority to disqualify employers and hurt borrowers near the finish line.
- Many PSLF applications, including requests to “buy back” time spent in forbearance, remain stuck in backlog. The American Federation of Teachers recently sought court orders to force faster processing and protect existing benefits.
- Because PSLF discharges are always tax-free, they remain more secure in this period of shifting policy.
In sum, while IBR discharges move forward, changes to PSLF and litigation around IDR make the broader student loans forgiveness landscape highly volatile.
Tax Risk Looms After 2025
A central tension for borrowers now is timing. The tax-free status of forgiven balances under IBR and most IDR plans is guaranteed only through December 31, 2025. After that:
- Discharges processed in 2026 or later may be taxed as ordinary income.
- Borrowers could receive a large tax liability on amounts they believed were forgiven.
- PSLF discharges remain exempt from taxes regardless of timing, but many borrowers do not qualify under PSLF.
Thus, borrowers must monitor their status and advocate for fast processing, to stay within the 2025 window if possible.
Backlogs, Delays & Operational Challenges
Despite the restart, not everything is smooth:
- Over 1 million pending IDs/PSLF cases remain unprocessed, creating delays that could shift discharges into 2026.
- A partial government shutdown in late 2025 is disrupting agency operations—many Education Department staff are furloughed—potentially slowing servicer communication or problem resolution.
- Borrowers may find it harder to get through to servicers or resolve errors during the shutdown period.
- The Department is also pushing a new, more proactive borrower support model, reworking the Office of the Ombudsman (now the Office of Consumer Education and Ombudsman) and planning standard guidance for loan servicers.
While these efforts aim to improve transparency and service, they are still early and may not fully offset delays or confusion.
What Borrowers Should Do Right Now
To protect your interests and take full advantage of forgiveness under current rules, here’s a checklist to follow:
- Confirm you’re in IBR or can be enrolled
If you were in SAVE or another IDR plan, contact your loan servicer to ensure your payments count under IBR. - Check your payment count and eligibility
Review updated records (available since January 2025) and be sure your qualifying months are accurately reflected. - Decide about opting out by October 21, 2025
If you prefer to keep paying (for example for tax or refinancing reasons), act before the cutoff. - Monitor servicer notices & communications
Watch for alerts from your servicer about discharge processing and required actions. - Continue making payments
Until discharge is processed, payments help avoid delinquency or interest issues. - Document everything
Save emails, notices, statements, and correspondence with servicers or the Department. - Stay alert for legislative action
Congress or courts may extend tax exemptions, modify eligibility, or impose new constraints. - Engage in advocacy and feedback
Many proposed regulations (e.g. PSLF changes) were opened for public comment—borrowers can make their voices heard.
Other Major Shifts to Watch
Beyond forgiveness mechanics, these systemic moves could reshape student debt policy:
- The Trump administration is reportedly considering selling segments of the federal student loan portfolio (totaling $1.6 trillion) to private entities. That could change collection rules and borrower protections.
- Congress’s 2025 overhaul eliminated or restructured some repayment plans not expressly codified, such as PAYE, replacing them with new versions pegged to statutory authority.
- New rules for how the Department evaluates borrower eligibility, employer “public service” status, and institutional accountability are expected in future rulemaking cycles.
- The Department is pushing for greater servicer accountability, issuing requests for comments to standardize servicing manuals and reduce inconsistent practices across servicers.
These shifts could affect future borrowers more than those already positioned near forgiveness—but the ripple effects will matter.
Risks, Uncertainty & Scenarios
Borrowers should be prepared for possible disruptions:
- Processing delays push discharges into 2026, triggering tax liability.
- Proposed rules strip eligibility, especially for some public servants.
- Litigation reversals could suspend discharges again if judges intervene.
- Partial or full repeal of tax exemption if Congress fails to act.
- Servicer errors or miscounting still a threat, making active monitoring essential.
Given the stakes, even borrowers who are far from forgiveness should stay informed—the next policy twist could affect them.
Student loans forgiveness under IBR is back. But the clock is ticking, and success may hinge on your actions in the coming weeks and months. Stay alert, act promptly, and share your questions or experiences below—your voice matters.
I invite you to leave a comment or share what you’re watching as these developments unfold.