Student Loan Borrowers Flounder Without Access to Forgiveness

Federal student loan borrowers who qualify to have their loans discharged are waiting in the dark for their promised loan forgiveness.

Earlier this year, the Department of Education temporarily paused time-based student loan forgiveness for borrowers under the Income-Based Repayment plan. It unclear when the department will reopen the only forgiveness option that was left to borrowers. As the tax deadline for student loan forgiveness approaches and budgets get tighter, borrowers are frustrated and waiting for action from the Department of Education.

“Sometimes you feel like you’re so close to the end, but then it’s just overwhelmingly frustrating, because you’re getting nowhere,” said Tammy Stinson, a borrower who has made enough payments to qualify for loan forgiveness but has not gotten her loans discharged yet.

After 20 or 25 years of qualifying payments, borrowers on an income-driven repayment plan are eligible to get their remaining balance forgiven. However, the Department of Education said it paused forgiveness under the IBR plan to adjust the number of payments students have made.

Adjustments are needed to comply with a court ruling prohibiting several types of forbearances and deferments from being counted as qualifying payments, according to a department spokesperson. A recently filed legal challenge alleges the department misinterprets the ruling, and the pause in forgiveness is unlawful.

Borrowers Held in Limbo While They Wait

A 53-year-old borrower from Seattle who wished to remain anonymous said, like thousands of other borrowers, she moved repayment plans to continue working toward forgiveness during the legal battle about the Saving For a Valuable Education plan. She said her payments almost doubled because of the move.

“Even though they were insane payments…I was like, ‘I want to do this and get it done,'” the borrower said. “Even if I’ve got to put bills and groceries on a credit card for now, I just need this to stop.”

Both the Seattle borrower and Stinson said the Federal Student Aid tracker showed they had reached the 300 payment threshold for forgiveness before it was taken down earlier this year. However, when both borrowers contacted their loan servicers, the companies would not confirm their payment counts.

“It’s frustrating. I’m in my 50s, and I can’t really make long-term financial plans until I know more about what’s happening with these loans,” the Seattle borrower said. “I’m trying to figure out if I have to go back to making $900 payments a month, like, how am I going to make ends meet? Am I going to have to find a different place to live so that my rent is cheaper?”

A Looming Tax Bomb

The frustration of not receiving their forgiveness is compounding for borrowers who worry the delay may cost them when tax season arrives.

Under former President Joe Biden, student loan forgiveness was temporarily exempt from being counted as income for tax purposes. However, that tax break will end after 2025.

The department did not give an estimated timeline for when it will resume processing forgiveness. Additionally, neither the IRS nor the Department of Education has made it clear if borrowers who reached forgiveness in 2025, but did not get their loans discharged until 2026 because of processing delays, will have to pay taxes on it.

“It’s very stressful, because you just think that you’re trading one problem for another problem,” Stinson said. “You can’t really plan ahead or do anything. It’s just frustrating to sit in limbo for so long without any updates.”

What Borrowers Are Doing As They Wait

For now, both borrowers are in forbearance and waiting for news about their forgiveness. Betsy Mayotte, president of The Institute of Student Loan Advisors, suggests this for any borrower who has reached forgiveness but has not gotten their loans discharged yet.

“It’s very anxiety-inducing, and I get that, unfortunately, there’s literally nothing they can do,” Mayotte said.

Experts say borrowers who have reached forgiveness but have not been placed in forbearance should continue making payments. A spokesperson for the Department of Education says borrowers will be refunded any overpayments when forgiveness resumes.