:max_bytes(150000):strip_icc()/GettyImages-2222594238-faa62d420f48489b894b5857ef59635f.jpg "Education Department Restarts Student Loan Forgiveness Process")
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KEY TAKEAWAYS
- The Department of Education has sent mass emails to student loan borrowers who have made the number of payments required to receive loan forgiveness, saying their loans will be discharged in a few months.
- Many of these borrowers were hoping to receive their forgiveness before the year ends, so they won’t have to pay taxes on it.
- The government is currently shut down because of a funding gap, so borrowers will likely have to wait until it opens before the Department of Education does anything more.
After months of waiting, federal student loan borrowers are seeing progress on their forgiveness.
The Department of Education sent mass emails to student loan borrowers Tuesday night, informing many that they have made the number of payments required to receive loan forgiveness under the Income-Based Repayment plan.
“The U.S. Department of Education (ED) will work with your loan servicer to process your IBR discharge over the next several months,” the email told borrowers.
Why This Matters
Many student loan borrowers have been waiting for months to have their loans discharged. Some assurance that the process is underway brings relief, and will ultimately ease their financial strain.
Student loan borrowers who make 20 to 25 years of qualifying payments under an income-driven repayment plan can have their remaining loan balance discharged. After a lawsuit blocking the Saving for a Valuable Education plan earlier this year, the Department of Education paused loan forgiveness under SAVE and all other income-driven repayment plans.
Borrowers who had already made more than enough payments to qualify for forgiveness were stuck waiting. Many wanted their loan discharged before a key tax break that makes forgiveness tax-free ends on Jan 1, 2026. After this year, the average borrower will have to pay thousands in taxes if their student loan is discharged.
A class action lawsuit last month requested that the Department of Education resume loan forgiveness for all borrowers in income-driven repayment plans. Last night’s email did not mention the lawsuit and only discussed forgiveness for borrowers under the IBR plan; it did not say if borrowers under Income-Contingent Repayment, Pay as You Earn, or the SAVE plan will receive forgiveness.
While the Department of Education’s email does not confirm whether borrowers will receive forgiveness before the year ends, it does give them more clarity about their loan status.
The government is currently shut down because of an impasse in Congress over healthcare funding. Until the government has funding again, non-essential functions at the Department of Education will be suspended. This means the borrowers who were told they would receive forgiveness will likely have to wait at least until the government is running again before their loans are discharged.
Investopedia reached out to the Department of Education, and in an automatic reply, the department said it would respond when government functions resume.
