Trump Management Resumes student Loan Forgiveness Notices Amid Government Shutdown
WASHINGTON – Despite the ongoing government shutdown, the U.S. Department of Education is notifying eligible student loan borrowers that their debt will be cancelled under the Income-Based Repayment (IBR) plan.
Borrowers are receiving emails stating,”You are now eligible to have some or all of your federal student loan(s) discharged because you have reached the necessary number of payments under your Income-Based Repayment (IBR) Plan.” CNBC has reviewed multiple copies of these notices. The department indicates loan discharges will be processed “over the next several months,” with a deadline of October 21st for borrowers to opt out of the relief.
This move comes after a period of halted forgiveness that sparked concern among borrowers. In July, the Education Department temporarily paused debt forgiveness for those enrolled in IBR, a plan that offers debt erasure after 20 or 25 years of payments, depending on the age of the loans.
The pause created uncertainty as IBR became the primary path to forgiveness following the passage of President Donald Trump’s “big lovely bill,” which phases out several existing student loan repayment plans. Borrowers who had been in repayment for decades feared being denied forgiveness they were entitled to under their loan terms.
The delay in IBR forgiveness became a key point of contention in a lawsuit filed by the American Federation of Teachers against the Education Department in March. The union, representing nearly 2 million members, accused the Trump administration of violating borrowers’ rights. A central concern raised by the union was the potential for significant tax burdens on borrowers if loan discharges occured after December.
The American Rescue Plan Act of 2021 had temporarily made student loan forgiveness tax-free at the federal level through the end of 2025, but Trump’s legislation did not extend this provision.
