Silently, student loan forgiveness has resumed under the US shutdown: This explains why relief efforts continue.
Silently, student loan forgiveness has resumed under the US shutdown: This explains why relief efforts continue.
Student loan forgiveness : Despite the continuing US government shutdown, some federal student loan debtors are receiving notices that their debt will soon be canceled. These surprise emails from the US Department of Education reveal that loan forgiveness is underway, despite the fact that many government functions are still on stop.
Many debtors are surprised by this development, as they had assumed that their loan relief would be halted indefinitely owing to legislative impasse. According to various notices obtained by CNBC, the Education Department is preparing to cancel some or all federal student loans for qualified students under the Income-Based Repayment (IBR) Plan.
Regardless of the shutdown, Student loan forgiveness continues.
According to a report by CNBC, one borrower received an email that stated, “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.” The notification also notes that the discharge process would take “over the next several months” and that beneficiaries have until October 21 to opt out of the relief.
The US Department of Education briefly halted loan forgiveness earlier this year to react to court decisions affecting which payment periods counted towards loan discharge. Borrowers who had been making payments for decades were concerned about the stoppage since they expected their loans to be canceled after 20 or 25 years under the IBR plan.
How recent policies influence student loan relief
In July, the Education Department announced a temporary suspension of IBR forgiveness. This comes after recent court decisions and the passing of President Trump’s “big beautiful bill,” which eliminates several existing repayment schemes. Currently, the IBR plan is the only one that includes debt forgiveness.
The American Federation of Teachers, which represents almost 2 million members, sued the Trump administration in March, accusing it of undermining borrowers’ rights by delaying loan forgiveness. The union cautioned that delays could result in unexpected tax payments for borrowers if discharges were made after December due to changes in tax law.
The American Rescue Plan Act of 2021 made student loan forgiveness tax-free at the federal level until the end of 2025. However, the new legislation enacted by President Trump does not prolong or make permanent this tax exemption.
What borrowers should understand about the procedure
Borrowers who receive these messages must decide by October 21 whether to accept or decline the debt discharge. The discharge applies to federal loans obtained through the IBR program, which forgives residual debt after 20 or 25 years of qualified payments.
According to an email from the Education Department, the discharge procedure will take several months. This incremental rollout explains why borrowers are receiving notices despite the government shutdown.
This continuation of loan forgiveness during a shutdown is unique, as most federal functions halt or slow. However, student debt discharge proceedings appear to be classed independently, allowing them to move forward.
According to CNBC, borrowers should carefully review any warnings they receive and refer to official Department of Education communications for the most up-to-date information on their loan status and options.
“This is really significant because for months, they have not canceled any loans under any income-driven repayment plan,” said Winston Berkman-Breen, the legal director of the Student Borrower Protection Center, an advocacy organization.
Borrowers who have achieved the payment threshold are not required to do anything; however, they should get a letter with more information about when the loan discharge will be finalized. (They can opt out before October 21, although it’s unlikely many would.)
In a recent email warning, the Education Department stated that it will tell servicers about the borrowers’ status after Oct. 21 and that most remaining balances would be removed within two weeks, while some may take longer to resolve.
