U.S. Resumes Student Loan Forgiveness for Millions Due to Lawsuit Outcome

Los Angeles, CA — On October 17, 2025, the U.S. Department of Education announced it will resume student loan forgiveness for eligible borrowers enrolled in Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans. This decision follows a legal agreement with the American Federation of Teachers (AFT), which claimed that the department unlawfully halted forgiveness processes for these repayment plans.

The resumption of loan cancellation affects approximately 2.5 million borrowers who are part of these ICR and PAYE programs. Previously, both plans allowed borrowers to make payments based on income and qualify for forgiveness after 20 to 25 years of payments. However, earlier in 2025, the Education Department had stopped processing forgiveness claims due to a court ruling that impacted the Biden administration’s broader student loan relief efforts.

AFT President Randi Weingarten stated, “We took on the Trump administration when it refused to follow the law and denied borrowers the relief they were owed,” adding that this agreement brings hope to those borrowers who were stuck in limbo.

The Department of Education also confirmed that those who qualify for forgiveness this year will not face federal taxes on their loan discharges. This tax relief is protected for any eligible borrowers until January 1, 2026, due to temporary legislation under Biden’s administration.

Borrowers who have made payments towards their loans beyond what was required for forgiveness will be reimbursed. The department is also mandated to file regular reports to the court, detailing the progress of processing applications and granting loan forgiveness.

In tandem with these developments, lawmakers from both the House and Senate have expressed concern over rising federal student loan delinquencies, urging the Education Department to take action to help borrowers who may default on their loans due to unmanageable payment requirements. If borrowers were to default, they would face serious repercussions, including wage garnishment and damaged credit.

The agreement is a significant step toward providing relief to millions of borrowers, but ongoing uncertainty regarding the government’s student loan policy landscape remains, especially with other repayment plans being delayed. As a result, borrowers are encouraged to maintain records of their payment histories and prepare for changes in the loan forgiveness process as new regulations unfold.