The Ministry of Education announced the cancellation of loans for more than 21,200 borrowers.
According to new court filings, the loan forgiveness is part of income-driven repayment plans.
However, this relief is short-lived as sweeping changes are made to the student loan system.
The March exits will affect 800 PAYE borrowers, 9,900 ICR borrowers and 10,500 IBR borrowers. All income-motivated releases, except those under the SAVE plan, are being processed. The SAVE program will be discontinued as soon as possible.
But borrowers who receive forgiveness in 2026 will face new changes.
Student loan discharge is now taxable again. Because the American Rescue Plan Act tax holiday expired on December 31, 2025, Congress refused to extend it.
This means that regardless of whether the portion of the loan is forgiven or forgiven, the IRS still treats that forgiven amount as taxable income.
The authorities decide to exempt those who have reached their repayment target before January 1, 2026.
Under the new changes, the SAVE plan is ending and borrowers who were enrolled in it have until July to move to another plan.
Those who fail to switch will automatically be placed on a Standard plan.
From July, the new Reimbursement Assistance Plan (RAP) will come into force, allowing lower monthly payments, as well as interest subsidies. However, the borrower must make payments for at least 30 years before receiving any forgiveness, which is more than double the 20 or 25 years currently required by existing programs.
Students who took out a loan from July onwards are no longer eligible for the PAYE, ICR and IBR schemes. Instead, their only choice would be RAP.
The scenario is not much different for the approximately 2 million students who are set to graduate this spring. The grace period remains the same, six months.
