Under the Trump administration, the Education Department this week reinstated a long-standing student loan forgiveness program that had been on hold since July, the Washington Post reported on Saturday.
Borrowers who have paid loans for 25 years under the Income-Based Repayment plan (IBR) can now have their remaining balances forgiven, according to companies that collect payments on behalf of the government. Roughly 2 million borrowers are enrolled in the IBR plan, yet many have not made enough payments to qualify for forgiveness.
IBR, established in 2007, is among four federal plans that base monthly payments on income and family size and offer loan forgiveness after 20 or 25 years of payments. The figure roughly translates to between 240 and 300 monthly installments. According to correspondence obtained by the outlet, the Dept. of Education said borrowers have until Oct. 21.
Court records show that as of July 31, over 1.3 million borrowers remain caught in a backlog of IBR plan applications. Another 72,730 borrowers are awaiting decisions on their Public Service Loan Forgiveness (PSLF) status, which offers debt relief after 10 years of service in qualifying public and nonprofit jobs.
Higher education expert Mark Kantrowitz recently told CNBC that the average loan balance for those enrolled in an IBR plan is approximately $57,000.
In March, the American Federation of Teachers filed a lawsuit against the Dept. of Education on behalf of its 1.8 million members urging action to prevent student loan borrowers from facing a federal tax bill that would hit in 2026. This week, the union filed a new court document seeking class action status.
″[A]ny borrower who is currently eligible to have their loans cancelled under an IDR plan, such as IBR, but whose cancellation is being withheld by the Department, risks this cancellation being taxed as federal income if the cancellation is not processed before January 1, 2026,” the filing reads.
Randi Weingarten, president of the American Federation of Teachers, said, “We stood up to them in court and demanded that they follow the law,” adding, “Right away, the U.S. Department of Education changed its tune – the clearest sign yet that borrowers’ rights can win out over this lawless and reckless ideological scheme.”
Although the Education Department is reopening loan forgiveness, the government shutdown may delay processing because almost 90% of staff are furloughed. It’s unclear if the remaining employees are handling borrower file cancellations.
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