Copyright Newsweek
The Trump administration has confirmed its agreement to cancel student loan debt for eligible borrowers under certain plans, following a legal agreement between the American Federation of Teachers (AFT) and the Department of Education. Newsweek has contacted the U.S. Department of Education and the AFT via email for comment. Amid the ongoing federal government shutdown, Newsweek received an automated response from the department which said: "We will respond to emails once government functions resume." The AFT directed Newsweek to its press release when approached for comment. Why It Matters The latest decision marks a major policy pivot for the Trump administration, which previously paused or restricted student debt relief through federal income-driven repayment programs. Around 2 to 2.5 million borrowers are either directly enrolled in qualifying plans or were affected by policy shifts in 2025, and the resumption of debt cancellation offers financial relief and legal clarity to Americans who have spent decades making payments on federal student loans. What To Know Earlier this year, the Trump administration removed the application to enroll in Income-Based Repayment (IDR) plans from government websites and issued an order to government student loan contractors to halt all IDR enrollment and processing, which it said followed court orders. The AFT then sued the administration in March 2025 for failing to provide Congressionally mandated debt relief, and after the lawsuit was filed, the government then resumed forgiving loans for borrowers enrolled in two Income-Based Repayment (IBR) plans: the Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans. To qualify for these plans, borrowers typically must have made 20 to 25 years of consecutive qualifying payments, depending on loan origination date and plan enrollment. As of October 2025, these plans account for more than 2 million borrowers. The recent legal settlement, filed on October 17, between the Department of Education and AFT confirms that the administration will now resume loan cancellations for the two IDR plans, grant payment refunds to eligible borrowers, and provide regular status updates to ensure transparency and compliance with federal law. The agreement also recognizes that borrowers who are eligible to have debts canceled in 2025 will not be forced to pay a tax penalty, due to changes in tax law, as a result of government processing delays and ongoing litigation. Borrowers eligible for relief began receiving Department of Education notifications in October. The emails outlined options to accept forgiveness or opt out. What People Are Saying AFT President Randi Weingarten said in a statement: "For nearly a decade, the AFT has fought for the rights of student loan borrowers to be freed from the shackles of unjust debt—and today, a huge part of that affordability fight was vindicated. 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. The 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." Winston Berkman-Breen, Protect Borrowers legal director said in a statement: “This is a tremendous win for borrowers. With today’s filing, borrowers can rest a little easier knowing that they won’t be unjustly hit with a tax bill once their student loans are finally canceled, pursuant to federal law. 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, and will do so under court supervision. We fully intend to hold them to their word.” What Happens Next The Department of Education said most loan discharges will be processed within two weeks after October 21.
