Trump and Student Loans: What’s Happening With Forgiveness, FAFSA and More

Let's break down the latest news that affects student loan borrowers.

Student loan forgiveness resumes for millions of borrowers

Qualifying borrowers on federal income-driven repayment (IDR) plans are back on track to have their remaining balances canceled.

A major win for borrowers on IDR plans

On Oct. 17, the Education Department (ED) and the American Federation of Teachers (AFT) jointly announced an agreement that resolves some aspects of a major lawsuit brought by the teachers' union. Most significantly, it gets the wheels moving on processing IDR forgiveness.

That forgiveness wasn’t necessarily a given — it was suspended in July, as the ED claimed it could not process applications due to a separate lawsuit challenging the SAVE plan. Then on Sept. 30, the ED began notifying borrowers on the income-based repayment (IBR) plan who had reached the qualifying number of payments that their servicers would be notified of their forgiveness eligibility.

The Oct. 17 agreement means processing will resume for additional IDR borrowers. This doesn't change eligibility, it simply means that borrowers on the following plans will have their loan balances discharged as they reach their required number of payments. That includes borrowers on:

• Income-Based Repayment (IBR) who have completed the required 20 or 25 years of repayment.

• Income-Contingent Repayment (ICR) who have completed the required 25 years of repayment.

• Pay as You Earn (PAYE) who have completed the required 20 years of repayment. 

The exact timelines for processing forgiveness are unclear since it’s influenced by verification backlogs, which may get worse during the government shutdown, and loan servicer capacity.

What about SAVE borrowers?

Unfortunately, this change doesn’t impact SAVE borrowers, as the plan is still blocked due to a separate legal action, but they can still take action toward forgiveness. The Oct. 17 agreement allows SAVE borrowers close to 20 or 25 years of repayment to be eligible for forgiveness if they enroll in another IDR plan before Dec. 31, 2025.

Even if a SAVE borrower's IDR application hasn't been processed when they hit the required number of payments — so they're still technically on the SAVE plan when their loans should be cancelled — forgiveness will be processed.

Tax bomb defused for some borrowers

Resuming forgiveness processing ASAP was a key element in the AFT's lawsuit because of imminent tax changes. The Covid-era American Rescue Plan Act exempted student loan forgiveness from federal taxes through Dec. 31, 2025. The AFT argued that ED's processing delays were threatening borrowers whose loans should have been cancelled before the end of the year with an unfair tax burden.

Those borrowers can breathe a sigh of relief. The Oct. 17 agreement makes borrowers who qualified for forgiveness in 2025 exempt from federal taxes regardless of when their forgiveness is processed or which IDR plan they’re enrolled in (excluding SAVE). This means if your forgiveness isn't processed until 2026, you're still protected from these tax implications.

Any other updates?

The ED announced Public Service Loan Forgiveness (PSLF) buyback applications will continue to be processed, making it possible for eligible borrowers to receive forgiveness. This is especially important for SAVE borrowers stuck in the administrative forbearance who were hoping for PSLF forgiveness. Time spent in the SAVE forbearance doesn't count toward PSLF forgiveness, so "buying back" payments that would have otherwise qualified can help borrowers reach the forgiveness threshold.

The One Big, Beautiful Bill Act, which passed on July 4, 2025, said “partial financial hardships” would be removed as a IBR requirement, but it wasn’t removed from the application. As a result of this agreement, applicants who were denied for the IBR plan after the bill passed because they lacked “partial financial hardships” are invited to reapply.

It’s still unclear when the ED will actually remove that requirement from the application, but lacking hardship should not be grounds for denial.

The federal government shuts down

On Oct. 1, the government shut down after Congress failed to pass a continuing resolution to keep federal agencies running.

How does this affect student loan payments?

It doesn’t. Payments are still due to your servicer during a shutdown.

Can I still submit the FAFSA?

Yes, you can and should still submit the Free Application for Federal Student Aid (FAFSA). These applications for federal financial aid will still be processed during the shutdown.

Remember, you have until June 30, 2026 to submit the FAFSA for the 2025-2026 school year. And you have until June 30, 2027 to submit the FAFSA for the 2026-2027 school year. Sooner is always better.

Learn more about how the shutdown will affect you.

FAFSA opens for the 2026-2027 academic year

The FAFSA for the 2026-2027 academic year is now open, as of Sept. 24. Students and their parents must fill out this form to be considered for federal, state and school-based aid, as well as federal student loans.

How do I get started?

Your first step to complete and submit the FAFSA is to head to studentaid.gov. Before getting started, gather parents’ and students’ Social Security numbers, 2024 tax returns and bank statements, among other documents. (See this FAFSA checklist.)

Set aside about 30 minutes to complete the form. A new development for this year’s form: You can invite contributors with their email address, rather than having them create their own FSA ID.

Remember that you must fill out the FAFSA every year to qualify for aid and loans.

What’s my deadline?

For the 2026-2027 school year, the federal deadline is June 30, 2027. But — and this is significant — submit it as soon as you can. Individual states and schools may set their own deadlines earlier.

Also, some aid is given on a first-come first-serve basis, so applying early gives you the best chance of claiming that free money. See more about FAFSA deadlines.

Note that there’s still time to submit the FAFSA for the current 2025-2026 school year. You have until June 30, 2026, but if you haven't done it yet, prioritize it now.

The “one big, beautiful bill” impacts borrowers

On July 4, President Donald Trump’s “one big, beautiful bill” was signed into law. It will majorly affect many consumers’ finances — including their student loans.

How big of a deal is this?

Big. Current and future borrowers could be affected in many ways.

Federal PLUS loans for graduate and professional students will go away. Parent PLUS loans will be capped. Most income-driven repayment plans will no longer be available. Debt relief options will become more limited. Loan forgiveness will be harder to achieve. And more.

That’s a lot — what happens next?

The good news is that none of these changes are happening right now. Most will go into effect sometime between July 1, 2026 and July 1, 2028.