The Trump administration has announced a reversal of its previous stance, allowing millions of borrowers to access student loan forgiveness through specific repayment plans. The decision comes after legal challenges and negotiations with the American Federation of Teachers (AFT).
Under the agreement, eligible borrowers will once again qualify for debt relief under two income-driven repayment programs—Income-Contingent Repayment and Pay as You Earn—until their expiration in 2028. These plans currently serve over 2.5 million participants, according to education experts. The administration confirmed that forgiven loan amounts will not be subject to federal taxation.
The AFT had filed a lawsuit against the Trump administration earlier this year, alleging violations of borrowers’ contractual terms by restricting access to repayment programs. The department had previously paused certain forgiveness options amid court orders, citing legal uncertainties surrounding the SAVE plan, a Biden-era initiative. However, the new agreement ensures continued processing of relief under alternative plans.
Winston Berkman-Breen, legal director for Protect Borrowers, praised the development as a “tremendous win for borrowers,” emphasizing that the administration will now adhere to statutory requirements for affordable payments and debt cancellation. The terms of the accord include court oversight to enforce compliance.