The Trump administration has reached a new agreement with the American Federation of Teachers (AFT) that could unlock long-awaited student loan relief for millions of borrowers.
Announced last week, the agreement allows the Department of Education to resume processing forgiveness for borrowers enrolled in Income-Contingent Repayment (IDR), Pay As You Earn (PAYE) and the Public Service Loan Forgiveness (PSLF) programs — especially those who’ve been chipping away at their loans for more than two decades. These programs will remain in place until 2028, when they’re expected to be phased out under President Trump’s “Big, Beautiful Bill.” (1)
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The deal also includes a tax break: borrowers who qualify for forgiveness through eligible payments this year won’t owe taxes on the canceled debt, even if the forgiveness doesn’t take effect until 2026. After 2026, however, forgiven balances will once again be considered taxable income.
“This is a tremendous win for borrowers,” Winston Berkman-Breen, legal director for Protect Borrowers, told CNBC. (2) “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.”
For the roughly 2.5 million borrowers currently enrolled in ICR or PAYE, this new agreement could finally make debt forgiveness more than just a promise. Here’s how to find out if you qualify.
A pause with a price
In March, the AFT sued the Trump administration, arguing it unfairly blocked federal borrowers from accessing repayment and forgiveness programs guaranteed under their original loan terms.
The lawsuit followed a pause that left nearly 2 million borrowers in ICR plans in limbo. (3) The administration said it was complying with court orders tied to the Biden-era Saving on a Valuable Education (SAVE) plan — a ruling it claimed could affect other IDR programs as well.
That pause marked a reversal from recent years, when the Department of Education under President Biden approved more than $180 billion in student debt cancellation for over 4 million borrowers, including roughly 1 million public service workers through the PSLF program. (4)
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Things to keep in mind
Even with a new agreement in place, borrowers shouldn’t expect instant relief.
Staffing shortages and layoffs within the Department of Education could slow down how quickly forgiveness applications are reviewed and processed, Megan Walter, senior policy analyst at the National Association of Student Financial Aid Administrators, told ABC News. (5)
Walter also noted that borrowers who keep making payments while their forgiveness applications are under review will get that money back if their application is approved. Still, she cautioned to keep pristine records.
If you think you could be eligible for this new wave of relief, it’s important to stay on top of your forgiveness status. Log in to your Federal Student Aid (FSA) account at studentaid.gov to check your loan type, confirm your repayment plan and make sure your contact information is up to date.
It’s also worth double-checking who your loan servicer is. Many borrowers have seen their servicers change over the past year, which can affect where your paperwork and updates are sent. Borrowers eligible for the student loan debt relief should receive email notifications from the Department of Education this month.
Lastly, as Walters reminds, keep thorough records of every payment you make, including statements or screenshots, in case you need to verify your qualifying payments later. And be sure to watch for updates directly from the Department of Education.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Congress (1); CNBC (2); Business Insider (3); ABC (4); New York Times (5).
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.