Borrowers who have been repaying their student loans for 25 years can get the loan forgiveness under the Income-Based Repayment plan. If you are enrolled in SAVE and wondering about how to get the loan forgiveness, check the full details here about the latest update.
SAVE Plan Student Loans
The federal government introduced the SAVE plan in 2023 to support borrowers in reducing their monthly bills with lower payments and no unpaid interest. Millions of borrowers enrolled in the SAVE plan with the hope of getting the loan forgiveness fast.
The SAVE plan offers payment based on the borrower’s income and family size, and provides faster forgiveness in 10 years for low balances, or in 20 or 25 years. The court has halted the SAVE loan forgiveness and other income-driven plans.
The Education department suggests that borrowers switch to the other plans as the interest on SAVE has begun from 01 August 2025. According to the latest announcement of the Education Department, student loan forgiveness is resuming under IBR, as it was not involved in the legal challenges.
Who will qualify for student loan forgiveness?
As per the latest announcement of the Education Department, student loan forgiveness under the IBR plan will be for the following borrowers:
- If you were paying for the student loans for 20 or 25 years, you may qualify for the loan forgiveness under the IBR plan.
- The payment for 20 to 25 years means you have made 240 or 300 monthly payments.
The department will inform borrowers about being eligible for loan forgiveness if they have spent a quarter of a century repaying the loan.
When will student loan forgiveness be implemented?
The US Education Department says it will automatically implement the student loan forgiveness for the eligible borrowers. Around 2 million people are using the IBR plan, but they have not made enough monthly payments, so they may not qualify for the forgiveness yet.
Borrowers who wish to opt out of loan forgiveness under IBR have until 21 October 2025. The forgiveness will be processed after 21 October for the eligible borrowers within two weeks. So, in the first week of November, you will get the notice of the student loan forgiveness.
What is the tax benefit and impact?
Borrowers should know they will have the tax benefit under the American Rescue Plan, as the canceled loans will not be taxed. The tax benefit under the Rescue plan will expire on 31 December 2025, so if your loan is forgiven now, there will be no tax liabilities.
The tax impact does not affect the Public Service Loan Forgiveness program. So, if you will be eligible for the loan forgiveness after the date, you might have to pay taxes on the forgiven debt unless the government expands the tax benefit.
What borrowers should do now?
If you are a student loan borrower and are wondering what to do with the new update, you can check the following points:
- If you are enrolled in the SAVE Plan, you can switch to the IBR plan or monitor the updates of the plan.
- If you are already enrolled in the IBR plan, you should check your monthly payment record to see if you have made the qualifying payments before 21 October and are eligible for the forgiveness.
- Under the One Big Beautiful Bill, the government is replacing the three income-driven plans with the Repayment Assistance Plan, so check the updates regularly to switch to the beneficial plan.
- The American Federation of Teachers has asked the court to ask the department to process the 75,000 requests of teachers or workers, or public servants’ wishes for buy-back for the time they spent in forbearance because of the court litigation, hence if you are a public servant, you can keep an eye on the following update.
Would the federal shutdown affect the loan cancellation?
Because of the lack of funds, a federal shutdown was announced, and many are wondering if it will affect student loan forgiveness. The report states the department is short of staff, which may slow down the loan cancellation as it would need to review the borrower’s files and other processes.
So, the eligible borrowers can expect some delay in their loan cancellation due to the federal shutdown. The loan servicers have confirmed they have received the department notice, but due to the delay, they may not receive borrower data on time.
The student loan forgiveness is ongoing under the IBR, so borrowers should check if they are eligible and get their loans canceled automatically. The SAVE plan is still frozen under the court ruling so if you meet the conditions, you can switch to the IBR plan.
Disclaimer: SAVE Plan student loan updates are for informational purposes only. Actual repayment and forgiveness rules are determined by the U.S. Department of Education.