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article The Trump administration has agreed to a plan to cancel student loan debt for eligible borrowers under certain income-driven repayment programs. Last week, the American Federation of Teachers and the Department of Education reached a legal agreement on Oct. 17. RELATED: Trump administration may sell student loan debt. What it means for borrowers FOX Business obtained a statement from the American Federation of Teachers with the organization saying that the deal awaiting court approval requires the Education Department to follow through on debt forgiveness for eligible borrowers in 2025 and guarantee they won’t face a surprise tax hit. What can borrowers expect with the student loan forgiveness changes? Why you should care: Under the legal agreement, the Trump administration must cancel student debt for all eligible borrowers enrolled in income-driven repayment (IDR), income-contingent repayment, Pay As You Earn, and Public Service Loan Forgiveness (PSLF) programs. Student loan borrowers who make payments after they are eligible for cancellation will be reimbursed. RELATED: Student loan forgiveness program getting Trump overhaul: What’s changing According to FOX Business, the Department of Education must also process IDR and PSLF "buyback" applications, including those from student loan borrowers who are no longer required to prove financial hardship. Meanwhile, student loan borrowers whose loans are canceled on or before Dec. 31, 2025, will not receive IRS forms treating the forgiven balances as taxable income. This agreement also reflects that student borrowers eligible to have their loan debts canceled this year will not be forced to pay a tax penalty because of changes in tax law. Borrowers eligible for the student loan debt relief received email notifications from the Department of Education in October. Newsweek reported that the emails list options to accept forgiveness or opt out. Since President Donald Trump returned to the White House, his administration has overhauled Biden-era student loan forgiveness policies. Several changes to student debt forgiveness have been reflected in Trump’s tax bill, including lowering caps on graduate school borrowing for lower- and middle-income people and eliminating economic hardship deferment programs.
