The Department of Education is resuming its student loan forgiveness plan after pausing it in July due to a court injunction, according to emails sent to federal loan servicers.
Companies and student loan non-profit organizations that collect payments said the department notified them that the Income-Based Repayment plan, which had been paused since July in response to a court injunction against similar loan repayment plans, will resume this month. The program will not be accepting new applicants due to the department’s ongoing overhaul of the student loan system, but people already enrolled will now be able to use the plan to achieve loan forgiveness after 20 to 25 years.
Borrowers have until Oct. 21 to opt out of the forgiveness program. After that date, the Department of Education will begin canceling the balances of eligible borrowers who did not opt out, according to emails from the department that were obtained by The Washington Post.
The Department of Education did not return a request for comment.
IBR, which Congress created in 2007, uses a borrower’s family income and size to determine the price of monthly payments. IBR promises loan forgiveness after 20 years for those who joined the program after July 1, 2014 or 25 years of payments for those who joined before. About 2 million Americans are currently enrolled in IBR, The Washington Post reported.
With the IBR set to forgive loans through October and November, borrowers will not be taxed on their loans in anticipation of a provision in the 2021 American Rescue Plan that prevents canceled student loans from being taxed, set to expire on Dec. 31. This means borrowers whose loans are forgiven after the end of the year will have to pay taxes on their forgiven debt.
Courts initially placed an injunction IBR in July against the Saving on a Valuable Education plan, former President Joe Biden’s student loan repayment plan. The court determined that in creating SAVE, the department went “well beyond” its authority by creating a plan where most of the loaned money is forgiven rather than repaid.
The original case only targeted SAVE, but the court determined two of the other Income-Driven Repayment plans — the Income-Contingent Repayment and Pay As You Earn — also exceeded the department’s authority as part of the decision.
In response to the injunction, the department also issued a temporary pause on IBR in July, the fourth IDR plan that was previously unaffected by the court ruling. The department said they did this in order to update payment records after the court injunction stopped forgiveness under the other IDR plans.
The department announced in July that it would revamp the student loan forgiveness program due to the One Big Beautiful Bill Act, enacting changes like reducing the number of payment options from seven to two.
The department announced that all four existing income-based programs, including IBR, will be retired and replaced with the new Repayment Assistance Plan starting July 1, 2026.
RAP is planned to have borrowers make monthly payments ranging from 1 percent to 10 percent of the borrower’s adjusted gross income over a limit of 30 years, with any remaining balance after the 30-year term forgiven.
The main difference between RAP and IBR is that IBR calculates monthly payments based on a percentage of borrowers’ discretionary income, or the income left over after living expenses, while RAP calculates payments based on a percentage of Adjusted Gross Income, or the total income from all sources.
