Borrowers are reporting that student loan forgiveness approvals are being processed by the Department of Education and its contracted loan servicers, despite the ongoing government shutdown. But it’s unclear how long that will last if the shutdown continues to drag out.
The department had previously paused student loan forgiveness under the Income-Based Repayment plan, which provides for a loan discharge after 20 or 25 years in repayment. The department had also suspended loan forgiveness for student loans under ICR and PAYE, two other income-driven repayment plans that were indirectly caught up in ongoing litigation over a fourth IDR plan, the Biden-era SAVE program. After a teachers’ union filed a legal challenge earlier this year over what it characterized as the Trump administration’s unlawful suspension of student loan forgiveness, the department resumed processing discharges for IBR, and then subsequently agreed to restart discharging student debt for qualifying borrowers under ICR and PAYE, as well.
So far, loan forgiveness for qualifying borrowers appears to be going forward. But that may change. Here’s what student loan borrowers should know.
Student Loan Forgiveness Processing Continuing For Some Borrowers On IBR
Student loan forgiveness processing appears to be continuing for borrowers, notwithstanding the ongoing government shutdown. However, many (if not all) of these approvals are for student loans in the IBR plan.
In September, just prior to the shutdown, the Department of Education began sending notices to borrowers that they were approved for student loan forgiveness under IBR, signalling that the IBR loan forgiveness pause had been lifted. The notices gave borrowers several weeks to “opt out” of loan forgiveness before discharges would go through later in the fall.
During the last week, borrowers have reported that their discharges are indeed being processed, with student loan servicers providing notifications of student loan forgiveness and zeroing out borrowers’ balances.
“Congratulations!” reads a standard email notice. “The United States Department of Education has forgiven some or all of your federal student loan(s).”
Student loan borrowers on Reddit confirmed that loan servicers are processing IDR discharges.
“It’s official: ‘Your student loans have been forgiven; document sent by Aidvantage today!’” said one Reddit user who was on the IBR plan. “I had received the golden email on 9/30 for IBR forgiveness.”
Borrowers are also reporting that the discharges are reflected on their Department of Education accounts at StudentAid.gov.
“Check your account on Federal Student Aid (FSA),” said another Reddit user who received student loan forgiveness. “My account reflects YOUR LOAN BALANCE IS $0!!! I thought it would take longer to update FSA! Good luck everyone!”
“Nice to see my FSA Dashboard finally showing what MOHELA showed a week ago — Direct Loan forgiven!,” said another Reddit user. “My long nightmare is over.”
Shutdown May Impact Student Loan Forgiveness Under IBR, ICR, And PAYE Plans
While the ongoing processing of IDR student loan forgiveness is welcome news for borrowers, the government shutdown may delay subsequent approvals. The current wave of discharges appears to be largely related to initial approvals that went out in September, before the government shutdown began. In cases where the Department of Education must approve loan discharges for student loans and submit instructions to loan servicers, the shutdown may cause delays.
This may be particularly true for student loans under the ICR and PAYE plans, which was shut down for the last year after the Department of Education interpreted a court ruling in the SAVE plan litigation as barring loan forgiveness under ICR and PAYE, as well as SAVE. The American Federation of Teachers, which filed a lawsuit over blocked IDR loan forgiveness, disputed this. Last week, a federal court approved a settlement agreement between the AFT and the department to reopen loan forgiveness processing under ICR and PAYE.
“The defendants shall continue processing loan cancellations for borrowers who are eligible for cancellation under the Original Income Contingent Repayment (’ICR’) and Pay As You Earn (’PAYE’) plans as long as these plans remain in effect,” reads the agreement. ICR and PAYE should remain active repayment plans until July 2028, when they will be phased out under provisions of the One Big, Beautiful Bill Act. PAYE provides for student loan forgiveness after 20 years in repayment, while ICR allows for loan forgiveness after 25 years in repayment.
But with the government still shut down, it is unclear that the department will be able to immediately implement the provisions of the settlement agreement with the AFT, particularly with respect to student loan forgiveness under ICR and PAYE. Indeed, the agreement itself suggests that the department will be unable to comply with certain provisions of the agreement related to the filing of periodic status reports until government funding has been restored.
“The defendants shall file six status reports that provide public information about certain topics raised in this litigation,” reads the agreement. The status reports will provide data on the department’s processing of student loan forgiveness under IBR, ICR, and PAYE, as well as the PSLF Buyback program. “The defendants’ first status report shall be due 30 days after the current lapse in federal government appropriations ends, and subsequent status reports shall be due every 30 days thereafter.”
As of this week, the Department of Education’s website explaining the implications of the ongoing legal challenges related to IDR plans still says that the department cannot process student loan forgiveness for student loans under ICR and PAYE, and that loan forgiveness under the IBR plan remains paused.
Other Student Loan Forgiveness Programs May Also Be Impacted By Shutdown
As the government shutdown drags on, other student loan forgiveness programs that require Department of Education approval may also experience delays and disruptions. This includes final approvals for student loans under Public Service Loan Forgiveness, or PSLF, which provides discharges in as little as 10 years for borrowers who work for qualifying nonprofit or government entities. The ongoing backlog associated with the PSLF Buyback program, which allows borrowers to “buy back” certain prior non-qualifying periods of deferment or forbearance, is likely to worsen as the department’s processing operations are paused. And student loan forgiveness under other programs, such as Borrower Defense to Repayment and the Total and Permanent Disability Discharge program, may also experience delays while most of the department’s staff remains furloughed during the shutdown.