ICR, student loan forgiveness available again under PAY: What you need to know

Millions of borrowers are once again eligible for student loan forgiveness, but they may need to take action to make sure they qualify.

Under an agreement reached by the American Federation of Teachers and the Trump administration, the U.S. Department of Education will resume canceling debt for eligible borrowers enrolled in income-contingent repayment plans (ICR) and pay-as-you-earn plans (PAYE).

Earlier this year, the ministry stopped canceling debts of borrowers under these two schemes, citing court orders.

Opportunities to cancel loans have become rare under the Trump administration. During President Joe Biden’s tenure, the U.S. Department of Education regularly announced debt cancellation for hundreds of thousands of borrowers.

More than 40 million Americans have student loans, totaling more than $1.6 trillion in debt.

Higher education expert Mark Kantrowitz estimates that about 2.5 million borrowers are enrolled in ICR or PAYE. The agreement could make more borrowers eligible for forgiveness. But that’s a limited window.

President Donald Trump’s “Big and Beautiful Bill” would phase out ICR and PAE starting July 1, 2028. The Department of Education agreed to resume relief only while ICR and PAY remain in effect.

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

ICR and PAYE are both income-driven repayment plans. This means that it limits the amount a borrower can claim as a percentage of their discretionary income, leading to loan forgiveness after a certain period of time. ICR in 25 years and PAE in 20 years.

Borrowers have been able to access debt cancellation under ICR since 1994 and under PAY since 2012.

Student loan borrowers may also qualify for forgiveness under an income-based repayment plan (IBR).

When the Education Department reduced forgiveness under ICR and PAYE earlier this year, officials said it was responding to a February court order blocking a Biden administration-era repayment plan known as the Savings for Worthy Education Plan (SAVE). Officials said the ruling also affects other repayment plans, although both ICR and PAYE have been available for more than a decade.

Consumer advocates and the American Federation of Teachers, a labor union representing about 1.8 million members, disagreed with the government’s interpretation of the ruling and said agencies must provide debt forgiveness under established programs. In its March lawsuit, AFT accused Trump officials of blocking borrowers from relief programs mandated by the terms of the loans.

Nancy Nearman, assistant director of the New York State Education Debt Consumer Assistance Program, said that before the AFT and the Department of Education reached an agreement, student loan borrowers who had accumulated enough credit to qualify for forgiveness under ICR or PAYE would have been required to transfer their loans to IBR to have them forgiven.

“Now we don’t have to do that,” Nearman said. “They can stay with these plans and achieve forgiveness.”

Kantrowitz said borrowers who wish to cancel a submitted application to switch to IBR can call the Federal Student Aid Information Center at 1-800-4-FED-AID. You can also try contacting your student loan servicer to cancel your request.

Once PAYE and ICR are phased out, borrowers enrolled in these plans who are not yet eligible for debt cancellation will still need to switch to a repayment plan that provides loan cancellation. Payments made under PAYE and ICR will be made on a schedule leading up to borrower relief, Nierman said.

Borrowers must keep records of payments made to avoid losing eligible months.

There is one important thing to note. Continued access to IBR is available only to those who borrowed before July 1, 2026. Loans made after that date will no longer qualify for IBR.

Recent legislation means that after that date, borrowers can only enroll in a new income-driven repayment plan called a “Repayment Assistance Plan” (RAP) or a revised Standard Plan.