Trump Administration Sends Student Loan Cancellation Notices

Despite the government shutdown, the U.S. Department of Education is sending notices to student loan borrowers informing them that their debt will soon be forgiven.

“You are now eligible to have part or all of your federal student loan(s) forgiven because you have reached the necessary number of payments under your income-driven repayment (IBR) plan,” reads an email sent to a borrower. CNBC reviewed several notices to borrowers.

According to the department’s email, the recipient’s loan discharge will be processed “over the coming months” and borrowers have until October 21 to opt out of the relief.

In July, the Department of Education announced it would temporarily stop forgiving debt for borrowers enrolled in the IBR plan. According to its terms, the IBR concludes that the debt will be erased after 20 or 25 years of repayment, depending on the age of the borrower’s loans.

This development has caused panic among borrowers. After recent legal action and Congress’s passage of President Donald Trump’s “big, beautiful bill” that phases out several existing student loan repayment plans, IBR is the only plan available at this time that offers debt forgiveness.

The department said it must suspend the relief while it responds to court orders changing the periods taken into account for loan forgiveness.

With the relief suspended, many borrowers who had been repaying for decades found themselves stuck with debt they should no longer owe, according to the terms of their loan.

Late IBR loan forgiveness has become a central issue in the American Federation of Teachers’ legal battle with the Department of Education. The teachers union, which represents nearly 2 million members, filed a lawsuit against the Trump administration in March, accusing it of disenfranchising student loan borrowers.

The union had pointed out that if IBR loan repayments were made after December, borrowers could end up with a huge tax bill.

The American Rescue Plan Act of 2021 made student loan forgiveness tax-free at the federal level through the end of 2025. Trump’s “big, beautiful bill” did not extend or make permanent this broader provision.