Forgiveness of Student Loans for Income-Based Repayment Plans in Question

Forgiveness of student loans for income-based repayment plans is in question amid a federal overhaul. Borrowers enrolled in the income-based repayment (IBR) plan have been left wondering if forgiveness will still be available to them.

A recent update from the Education Department stated that IBR forgiveness is paused while systems are updated, but "IBR forgiveness will resume once those updates are completed," the agency said.

IBR is not affected by a federal court's injunction blocking former President Joe Biden's plan. It was created by Congress separately from other existing repayment plans and is exempt from some changes coming from President Donald Trump's tax and spending bill.

The IBR plan reduces monthly payments for borrowers with lower incomes and invokes a statute that authorizes student loan forgiveness of the balance at the end of a 20- or 25-year repayment term. The Education Department hasn't given a timeline for when its system update will be complete and forgiveness will resume.

Borrowers enrolled in IBR who have reached the threshold for forgiveness but are not seeing their loans discharged as a result of the pause may continue to make payments with the expectation that the Education Department will refund the excess payments. Borrowers can also request forbearance from their loan servicer, which would allow interest to continue accruing on any remaining balance.

Trump's tax and spending law will eventually phase out the ICR, PAYE, and SAVE plans, replacing them with the Repayment Assistance Plan. IBR plans will continue to exist and provide forgiveness after 20 or 25 years. RAP will require 30 years of repayment before forgiveness is granted.