As of October 2025, the U.S. Department of Education has resumed processing student loan forgiveness under Income-Based Repayment (IBR) plans. Approximately 2 million borrowers are set to benefit from this resumption, following a temporary pause that began in July. (Business Insider)
What Borrowers Need to Know
- Opt-Out Deadline: Borrowers who wish to continue making payments and avoid potential tax implications must opt out by October 21, 2025. After this date, discharges will be processed, with most completed within two weeks. (Business Insider)
- Tax Considerations: The American Rescue Plan’s tax exemption on forgiven loans is set to expire on December 31, 2025. Post this date, forgiven amounts may be subject to federal income tax. (Business Insider)
Ongoing Challenges and Proposals
- Backlog in Repayment Plan Applications: Over 1 million applications for income-driven repayment plans remain unprocessed due to a significant backlog and the ongoing government shutdown. (The Times of India)
- Potential Sale of Federal Student Loan Portfolio: The Trump administration is considering selling parts of the federal government’s $1.6 trillion student loan portfolio to private investors. This move aims to reduce federal involvement in student lending but raises concerns about borrower protections. (Reuters)
Conclusion
For borrowers on IBR plans, the resumption of loan forgiveness offers significant relief. However, it’s crucial to be aware of the October 21 opt-out deadline and the approaching expiration of the tax exemption. Staying informed and proactive can help ensure that you maximize the benefits of these programs.
