Overview
- Under an Oct. 17 settlement with the American Federation of Teachers, the department reinstated cancellations for IBR, ICR and PAYE and will process PSLF buybacks under court supervision.
- Servicers this week notified borrowers that balances were wiped, applied effective dates tied to final qualifying payments in 2025, began refunding post‑eligibility payments and reported discharges to credit bureaus.
- Borrowers who become eligible in 2025 will not owe federal income tax on forgiven amounts even if processing occurs later, though the IRS and Treasury have final authority and some states may tax the relief.
- The deal excludes the SAVE plan, which remains blocked by courts, and advocates say borrowers nearing forgiveness on SAVE should consider switching to IBR, ICR or PAYE.
- The department is working through a large IDR backlog from earlier pauses and must file six monthly progress reports to the court, with reporting suggesting as many as 2.5 million borrowers could be impacted.