The Trump administration has agreed to resume and expedite student loan forgiveness for approximately 2.5 million borrowers enrolled in certain federal repayment plans, following a lawsuit filed by the American Federation of Teachers (AFT).
This agreement was reached to resolve legal challenges about the administration’s previous halt on loan forgiveness under income-driven repayment programs caused by its interpretation of a different court ruling.
The big picture: The repayment plans affected include income-driven repayment (IDR), income-contingent repayment plans, Pay As You Earn (PAYE), and the Public Service Loan Forgiveness (PSLF) program.
- Borrowers who qualify for forgiveness under these plans will have their remaining student loan debt canceled by the Department of Education.
- For those borrowers who made payments beyond the required amount for loan forgiveness, the Education Department will reimburse those overpayments.
- The administration will continue to process applications related to IDR and PSLF “buyback” options. The buyback program allows borrowers to count certain periods of missed payments during forbearance or deferment toward forgiveness qualification, expanding eligibility.
Go deeper: Importantly, forgiven loan balances discharged before December 31 will not be treated as taxable income under current law. Starting 2026, forgiven balances are expected to be taxed due to recent tax law changes, so timing impacts borrower tax liabilities.
- The American Federation of Teachers played a key role in this agreement, with AFT President Randi Weingarten stating that their lawsuit forced the administration to follow the law and deliver relief to borrowers who had been stuck “in limbo.”
- The Education Department said the Trump administration is reviewing all forgiveness programs to identify which ones remain unaffected by court rulings that had blocked parts of the Biden administration’s prior student debt cancellation efforts.
- The administration highlighted its commitment to simplifying the student loan repayment process through the forthcoming “One Big Beautiful Bill Act.”
- To ensure accountability, the Education Department must file progress reports with the court every six months detailing the status of application processing and loan forgiveness activities in line with the agreement.
- Beyond the millions in IDR plans, roughly 70,000 borrowers are waiting for forgiveness under the PSLF program, designed to forgive loans after 120 qualifying monthly payments for borrowers working in public service or nonprofit sectors.
