Overview
- Roughly 2.5 million borrowers in Income Contingent Repayment and Pay As You Earn again qualify for balance discharges, reversing a pause tied to litigation over the SAVE plan.
- Borrowers who have accrued enough qualifying time under ICR or PAYE no longer need to switch to Income-Based Repayment to receive cancellation.
- The settlement follows an American Federation of Teachers lawsuit challenging the department’s earlier halt, which officials had linked to a February court order blocking SAVE.
- Forgiveness can proceed only while ICR and PAYE remain available, with policy changes set to limit IBR access for new loans after July 1, 2026 and fully phase out ICR and PAYE by July 1, 2028.
- Borrowers who become eligible in 2025 but are discharged in 2026 can avoid federal tax on forgiven debt, with SAVE enrollees needing to apply to switch to IBR, ICR, or PAYE by December 31 to secure that protection.