Student-loan forgiveness delays will soon become a bigger problem for borrowers

"The Department of Education said in an August court filing that 1.3 million income-driven repayment plans are pending as of July 31, along with 72,730 PSLF requests for credit toward forgiveness coming from extra payments. The continued backlogs prompted the American Federation of Teachers to amend a previously filed complaint into a class action on September 17, and it urged the department to cancel the loans of borrowers who have met their payment threshold through their repayment plans or PSLF."

""At this rate, borrowers may have to wait years to receive the benefits that Congress directed should be provided to them," the filing said. This is especially timely, the filing added, because loan forgiveness through income-driven repayment plans will once again be taxable beginning January 1, 2026. That's because a 2021 provision in the American Rescue Plan that made forgiveness tax-free is expiring. Borrowers seeking forgiveness under those plans could face thousands of dollars in tax bills, d"

1.3 million income-driven repayment plans and 72,730 Public Service Loan Forgiveness (PSLF) credit requests were pending as of July 31. Processing delays began under the SAVE plan due to legal challenges and resumed in January, but advocates sued over continued slow processing. The American Federation of Teachers converted a complaint into a class action seeking cancellation of loans for borrowers who met payment thresholds. Income-driven repayment forgiveness will become taxable again on January 1, 2026, when the American Rescue Plan tax-free provision expires, exposing eligible borrowers to potentially large tax bills. Debt relief through income-based plans is delayed until winter.

Read at Business Insider