Trump Administration Agrees To Resume Student Loan Forgiveness For Millions

The Trump administration has agreed to resume student loan forgiveness programs for eligible borrowers, following a legal settlement with the American Federation of Teachers (AFT). This agreement mandates the Department of Education to continue processing loan forgiveness applications under Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), and Public Service Loan Forgiveness (PSLF) Buyback programs until these plans are phased out by July 1, 2028. The AFT sued the administration earlier in 2025 for halting access to these federally mandated forgiveness programs, which led to the settlement ensuring that millions of borrowers, particularly public service workers, regain access to relief. The settlement also includes provisions to prevent borrowers from being taxed on delayed forgiveness by allowing the effective date of loan discharge to correspond to when eligibility was reached, not when the discharge is processed. Over 2 million borrowers currently enrolled in ICR and PAYE plans are expected to benefit from the resumption of these programs, which had been paused due to court rulings affecting the Biden-era SAVE plan. The AFT emphasized this as a vital victory for borrowers who have struggled under the burden of student debt, particularly teachers and public service employees, many of whom owe significantly more than their original loan amounts due to repayment complexities.