Loan Forgiveness is Restarting : What You Need to Know

After months of uncertainty, long-term Income-Driven Repayment (IDR) borrowers finally have good news. A recent settlement in AFT v. U.S. Department of Education clears the path for the Department to restart forgiveness for borrowers in Pay As You Earn (PAYE), Income-Contingent Repayment (ICR), and other qualifying IDR plans.

One of the biggest benefits in the agreement:If you qualify for forgiveness by December 31, 2025, your forgiven balance will stay federally tax-free even if the discharge is processed afterward.

This protection gives borrowers breathing room while the Department works through the backlog created over the past year.

Why Forgiveness Was Stalled

Over the last two years, the student loan system has been reshaped by the rollout of the SAVE Plan and the lawsuits that followed. Those legal battles led to widespread delays across loan servicing, including a pause on forgiveness for borrowers in PAYE and ICR.

Many borrowers who had already reached 20 or 25 years of repayment and should have been eligible for forgiveness suddenly found their accounts frozen.

Without action, borrowers who hit their forgiveness milestone this year risked losing tax protection if their discharge didn’t finalize until 2026.The settlement directly resolves this issue and pushes the Department to restart processing right away.

How Many Borrowers Are Affected?

Recent Department of Education data highlights the scale:

• About 2.3 million borrowers remain in PAYE or ICR.

• Nearly 800,000 are within five years of forgiveness eligibility.

• Many have been waiting months for their payment counts to resume after administrative holds.

And because of the IDR Account Adjustment, some borrowers may already have enough qualifying months to be forgiven as soon as their counts are updated.

What This Means for You

This settlement finally puts long-overdue movement back into the forgiveness process. Borrowers who have spent decades making payments under IDR plans should begin seeing updates and, for many, complete discharge in the coming months.

If you're in an IDR plan like PAYE or ICR, now is the time to:

1. Review your repayment history and confirm your qualifying month count.

2. Monitor your loan servicer's updates as adjustments roll out.

3. Make sure your contact information is current so you don’t miss any notifications.

After years of delays, forgiveness is moving forward again and borrowers who qualify by the end of 2025 will remain protected from unexpected federal tax bills.

👉 Learn more about IDR plans and forgiveness eligibility by visiting https://SmartLoanAid.com today or give their team a call at (844) 869-5521