Student loan forgiveness available again under ICR, PAYE: What to know

Millions of borrowers once again have access to student loan forgiveness, but they may need to take action to ensure they qualify.

The U.S. Department of Education will resume cancelling the debt of eligible borrowers enrolled in the Income Contingent Repayment plan, or ICR, and the Pay as You Earn plan, or PAYE, according to an agreement reached by the American Federation of Teachers and the Trump administration.

Earlier this year, the department had stopped cancelling the debt of borrowers in those two plans, citing a court order. 

Loan cancellation opportunities have become rarer under the Trump administration. While President Joe Biden was in office, the U.S. Department of Education made regular announcements that it was wiping away hundreds of thousands of borrowers’ debts.

More than 40 million Americans hold student loans, and the outstanding debt exceeds $1.6 trillion. 

Some 2.5 million borrowers are enrolled in either ICR or PAYE, according to an estimate by higher education expert Mark Kantrowitz. The agreement may allow more of those borrowers to qualify for forgiveness. But it’s a limited window.

President Donald Trump’s “big beautiful bill” will phase out ICR and PAYE as of July 1, 2028. The Education Department has agreed to resume the relief only while ICR and PAYE remain in effect.

Here’s what borrowers need to know about the resumed loan forgiveness under ICR and PAYE.

Both ICR and PAYE are income-driven repayment plans, meaning they cap a borrower’s bills at a share of their discretionary income and lead to loan forgiveness after a certain period; ICR after 25 years and PAYE after 20 years.

Borrowers have had access to debt cancellation under ICR since 1994 and under PAYE since 2012.

Student loan borrowers also have access to forgiveness under the Income-Based Repayment plan, or IBR.

When the Education Department curtailed forgiveness under ICR and PAYE earlier this year, officials said they were responding to a February court order that blocked a Biden administration-era repayment plan, known as the Saving on a Valuable Education plan, or SAVE. The officials said that the ruling had implications for other repayment plans, although ICR and PAYE have both been available for over a decade.

Consumer advocates and the American Federation of Teachers, a union representing some 1.8 million members, disagreed with the administration’s interpretation of the ruling and said the agency was required to offer debt forgiveness under the well-established programs. In its March lawsuit, the AFT accused Trump officials of blocking borrowers from the relief programs mandated in their loan terms.

Before the AFT and Education Department reached their agreement, student loan borrowers who had accumulated enough credit to get forgiveness under ICR or PAYE would have needed to transfer to IBR to get their loans discharged, said Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York.

“Now, they don’t have to do that,” Nierman said. “They can remain in these plans and realize forgiveness.”

Borrowers who want to cancel a submitted request to switch into IBR can try calling the Federal Student Aid Information Center at 1-800-4-FED-AID, Kantrowitz said. You might also try contacting your student loan servicer to cancel your request.

Once PAYE and ICR are phased out, borrowers in those plans who haven’t yet become eligible for debt erasure will need to switch to a repayment plan that still offers loan cancellation. The payments made under PAYE and ICR will count on the borrower’s timeline to the relief, Nierman said.

Borrowers should keep records of the payments they have made, to make sure they don’t lose any qualifying months.

One important point to note: Continued access to IBR will be available only to those who borrow before July 1, 2026. Loans taken out after that date will void eligibility for IBR.

Due to recent legislation, borrowers after that date will be able to enroll in only a new income-driven repayment plan called the “Repayment Assistance Plan,” or RAP, or a revised Standard Plan.