Trump Administration Resumes Student Loan Forgiveness Plan for Millions

Washington, D.C. — The Trump administration has agreed to reinstate student loan forgiveness for millions of borrowers as part of a new deal announced on Friday. This agreement, made between the U.S. Department of Education and the American Federation of Teachers (AFT), signals a significant shift for borrowers affected by previous loan cancellation suspensions.

Under the new terms, eligible borrowers who are enrolled in the Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans will once again have their applications for student loan forgiveness processed. The decision follows a series of legal challenges regarding the administration’s temporary halts in these repayment programs.

“This is a tremendous win for borrowers,” stated Winston Berkman-Breen, legal director for Protect Borrowers. “The U.S. Department of Education has agreed to follow the law and deliver Congressionally mandated affordable payments and debt relief to hard-working public service workers across the country.”

More than 2.5 million borrowers are currently under ICR or PAYE, according to estimates from higher education expert Mark Kantrowitz. Earlier this year, the Education Department had suspended processing for some income-driven repayment plans, citing court orders. However, the AFT contended this halt impacted more borrowers than the court ruling intended.

As a result of this new agreement, borrowers eligible for forgiveness in 2025 will also be exempt from federal taxes on the canceled debt, addressing concerns over financial repercussions from their loan forgiveness. A vital provision in the agreement extends tax protections to borrowers transitioning from the recently paused SAVE plan to ICR or PAYE before December 31, 2025.

The AFT’s lawsuit emphasized the department’s delays prevented many borrowers from accessing their repayment rights. In addition, it managed to address significant backlogs in processing loan forgiveness applications and the Public Service Loan Forgiveness (PSLF) program.

The settlement comes as the Department of Education faces pressure to enhance its responsiveness amid an ongoing federal government shutdown, which complicates its operations. The education department has committed to providing monthly status updates regarding the implementation of this agreement and its impact on student loans.

Berkman-Breen noted, “We fully intend to hold them to their word,” indicating that the AFT would actively monitor the department’s compliance with the agreement.