Advocates are ecstatic after the Trump administration agreed to a student loan forgiveness deal that will allow millions of borrowers to see relief, a rare happy break for a group that has found few defenders in the current White House.
The administration reached a deal with the American Federation of Teachers (AFT) last week that resumes student debt relief, mostly for those who have been paying on their loans for the past 20 to 25 years.
The deal says the Education Department will continue to process relief for borrowers in Income-Contingent Repayment and Pay as You Earn plans, until the options are eliminated in 2028 under President Trump’s “Big, Beautiful Bill.”
It also allows those who earn student loan forgiveness through qualifying payments this year to avoid taxes on the debt relief even if the cancellation does not happen until 2026. Starting 2026, those who receive student debt relief will have to pay taxes on that money.
“This year, we took on the Trump administration when it refused to follow the law and denied borrowers the relief they were owed. Our agreement means that those borrowers stuck in limbo can either get immediate relief or finally see a light at the end of the tunnel. And, crucially, they won’t ever get taxed on that relief,” said AFT President Randi Weingarten.
“AFT will hold the federal government to its word, and we won’t stop fighting until college is affordable and taking out a student loan doesn’t trap millions of Americans in a ruinous and exploitative debt cycle,” she added.
The agreement came following a monthslong legal battle after the Trump administration paused student loan forgiveness under multiple income-driven repayment plans due to a separate fight in the courts.
“The Biden Administration’s illegal attempts at mass student loan forgiveness impacted all of the Department’s income-driven repayment programs, including Income-Based Repayment. The courts intervened to stop their illegal efforts but that also impacted Department systems and prevented us from processing lawful loan discharges,” an Education Department spokesperson said.
”Thanks to the Trump Administration’s efforts to separate out the illegal loan cancellation schemes, we are able to process legitimate loan cancellations once again for borrowers who have been making payments for the requisite number of years,” the spokesperson added.
The deal also benefits those on the Public Service Loan Forgiveness Program, who will now have their applications processed for “buy backs,” meaning payments for months a borrower was in forbearance can count towards loan cancellation eligibility.
For those on the Biden administration’s SAVE plan, advocates are encouraging those who have made 20 years of payment to call their loan servicer and see if they can switch to an IDR plan to be eligible for student loan forgiveness.
“The court order, unfortunately, does not allow loan discharge for people enrolled in the SAVE plan,” said Sabrina Calazans, executive director of the Student Debt Crisis Center.
Advocates say it could take weeks to see the fruits of this deal due to the federal shutdown, with 95 percent of Education Department employees currently furloughed.
“We welcome student loan cancelation and debt relief for folks, especially those who have been in repayment and have done their due diligence and these repayment plans, and it’s, it’s long overdue for a lot of these families, especially in a time of financial and economic uncertainty and during a government shutdown,” Calazans said.
Winston Berkman-Breen, legal director for Protect Borrowers, the group that represented AFT and others in court on this case, said another advantage of this agreement is the updates the Education Department will have to provide the court on the status of loan relief.
“We’re really going to stay vigilant, and part of the agreement was to, once the government resumes, once the shutdown is over, file monthly status reports and updates with the court on the progress of their commitment. How many people are getting their loans canceled, How many people are in the queue to get their loans canceled, etc, and so we’ll be monitoring that over the next few months, and hopefully things go well, but if they don’t go well, we still have our case live in court and we’ll go back to the judge to get relief,” Berkman-Breen said.
“It’s a really important accomplishment last week, but really, what it does is it tees us up to make sure that there’s transparency and court oversight as the Department of Education and the Trump administration start to deliver on what they promised,” he added.
