In a surprising turn of events, some federal student loan borrowers are beginning to receive notifications that their debt will soon be discharged, even as the US government remains in a shutdown. These unexpected emails from the US Department of Education confirm that loan forgiveness is moving forward, despite much of the government’s operations being on hold.
This development is particularly surprising for many borrowers who had feared their much-anticipated loan relief would be indefinitely stalled due to the political gridlock. According to multiple reports, including those reviewed by CNBC, the Education Department is actively proceeding with canceling some or all federal student loans for eligible individuals enrolled in the Income-Based Repayment (IBR) Plan.
Student Loan Forgiveness Continues Despite Shutdown
One email, cited by CNBC, clearly states: “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 further clarifies that the discharge process will unfold “over the next several months,” giving recipients until October 21st to opt out of the relief.
Earlier this year, the US Department of Education had temporarily halted loan forgiveness while it addressed court orders impacting which payment periods qualified for discharge. This pause had sparked considerable concern among borrowers, many of whom had been diligently making payments for decades, anticipating their loans would be forgiven after 20 or 25 years under the IBR plan.
Recent Policies and Their Impact on Student Loan Relief
The temporary halt to IBR forgiveness was announced by the Education Department in July. This decision came in the wake of recent court rulings and the enactment of President Trump’s “big beautiful bill,” which aims to phase out several existing repayment plans. As of now, the IBR plan stands as the sole program offering debt forgiveness.
In March, the American Federation of Teachers, representing nearly 2 million members, initiated legal action against the Trump administration. The lawsuit accused the administration of infringing upon borrowers’ rights by delaying loan forgiveness. The union also raised concerns that delays could burden borrowers with unexpected tax liabilities if discharges were to occur after December, owing to changes in tax law.
While the American Rescue Plan Act of 2021 made student loan forgiveness tax-free at the federal level through the end of 2025, the new legislation under President Trump’s administration did not extend or permanently establish this crucial tax exemption.
Key Information for Borrowers
Borrowers who receive these important notices have until October 21st to decide whether to accept or decline the debt discharge. This forgiveness specifically applies to federal loans managed under the IBR plan, which provides for the cancellation of remaining balances after 20 or 25 years of qualifying payments.
The Education Department’s communication indicates that the full discharge process will span several months. This staggered approach is the reason why borrowers are receiving their notifications even during the current government shutdown.
The continuation of loan forgiveness during a federal shutdown is indeed unusual, given that most federal services typically experience pauses or significant slowdowns. However, it appears that student loan discharge processes are categorized separately, allowing them to proceed uninterrupted.
As advised by CNBC, all borrowers should meticulously review any notices they receive and consult official Department of Education communications for the most up-to-date guidance regarding their loan status and available options.