Student Loan Forgiveness Finally Happening? Decoding the Latest Restart’s Real Impact

Federal student loan payments are back—but so are forgiveness rumors that could reshape your financial future.

The Great Pause Ends

After multiple extensions, the payment freeze officially lifts this month. Millions of borrowers face renewed obligations while awaiting potential debt cancellation.

Forgiveness Pathways Active

Existing programs continue processing applications despite legal challenges. Public Service Loan Forgiveness approvals hit record numbers last quarter, while income-driven repayment plans see streamlined processing.

What Restart Means for You

Payments resume with updated terms and expanded hardship options. New income-driven plans cap monthly payments at 5% of discretionary income—down from 10% previously.

The Fine Print

Watch for servicer transitions and processing delays. Some borrowers report system glitches affecting payment applications and forgiveness tracking.

Long Game Strategy

While politicians debate broader relief, smart borrowers are optimizing repayment strategies. Because let's be honest—banking on government promises is like trusting a crypto project's 'fully diluted valuation' math.

KEY TAKEAWAYS

• Last week, the Department of Education said it is resuming loan forgiveness for borrowers under the Income-Based Repayment, Income-Contingent Repayment, and Pay as You Earn plans.
• Borrowers under the Saving for a Valuable Education plan are still unable to make payments that move them closer to forgiveness. However, they can transfer to an eligible plan to get their loans discharged.

Student loan forgiveness is resuming, and borrowers who have been waiting months for their loans to be discharged are moving one step closer.

The Department of Education agreed Friday afternoon to settle a class-action lawsuit in which a group of borrowers sued over the pause in time-based student loan forgiveness. In a statement, the Department of Education said it will resume granting loan forgiveness under the Income-Based Repayment, Income-Contingent Repayment, and Pay as You Earn plans.

These three income-driven repayment plans adjust student loan payments according to the borrowers' income. Since payment amounts change over time, there is no set date for when the loan will be paid off, and after borrowers pay for a certain number of years, they can get the remainder of their loans discharged.

Earlier this year, the department paused granting loan forgiveness for income-driven repayment plans, citing a court ruling. Borrowers who have completed 20 or 25 years of qualifying payments on either IBR, ICR, or PAYE have been waiting months to receive their loan forgiveness.

The Department of Education also confirmed that it WOULD ensure borrowers eligible for forgiveness in 2025 would not pay taxes on the discharge.

Why This Matters

Student loan payments have been pressing borrowers' budgets, with many cutting back on spending to resume payments. This could weaken an already strained economy, but borrowers who will receive their awaited loan forgiveness will soon have more room in their budgets to spend.

What About SAVE Borrowers?

However, not all borrowers on an income-driven repayment plan can access forgiveness yet.

Saving for a Valuable Education, the income-driven repayment plan also known as SAVE, was created under former President Joe Biden’s administration but is still blocked by ongoinglawsuits. Its 7.7 million borrowers remain in forbearance, and payments made while in forbearance do not count as qualifying payments toward loan forgiveness.

This past year, borrowers who were close to receiving forgiveness transferred to other income-driven repayment plans to continue making payments that count toward forgiveness. The process of transferring, however, has been slow for many. As of Aug. 31, more than 1 million applications to transfer or enter into an income-driven repayment plan were still pending.

The department confirmed that SAVE borrowers who transfer to IBR, ICR, or PAYE and made enough payments to qualify for forgiveness on or before December 31, 2025, will get their loans discharged tax-free, even if their transfer paperwork is processed in 2026.

RELATED EDUCATION

When Will I Get My Forgiveness?

The department did not confirm which date borrowers will receive their forgiveness.

At the end of September, the Department of Education sent mass emails to many borrowers under the IBR plan, informing them that they are working with loan servicers to deliver forgiveness in the next several months.

Although the government is still shut down, most Federal Student Aid processors and loan servicers, such as MOHELA and Nelnet, will still be open. However, the Department of Education's federal offices have closed during the shutdown, which could delay the process.