The Trump Administration announced it would reinstate student loan forgiveness for millions of qualified individuals, following a settlement reached with the American Federation of Teachers (AFT) several months after the union initiated a lawsuit.

Under the agreement between the Administration and the AFT, the Department of Education is set to recommence processing loan forgiveness for borrowers who qualify and have participated in specific repayment programs for many years. This lawsuit was filed by the union against the department in March, subsequent to the Trump Administration’s decision to suspend loan forgiveness under these particular plans. 

Furthermore, this new agreement guarantees that borrowers whose loans are scheduled for forgiveness this year will not face substantial tax liabilities resulting from processing delays.

In a press release, AFT President Randi Weingarten commented, “Earlier this year, we challenged the Trump administration for its refusal to adhere to the law and for denying borrowers the relief they were entitled to.” She added, “Our current agreement signifies that borrowers who have been in uncertainty can now anticipate either prompt relief or a clear path forward. Importantly, they will not incur taxes on this relief. The AFT intends to hold the federal government accountable to its commitments.”

The Department of Education indicated in a statement that “the Administration is committed to advancing its efforts to streamline the student loan repayment system through the enactment of the President’s One Big Beautiful Bill Act.”

Here are the essential details concerning this agreement.

What forgiveness programs does this agreement encompass?

The Trump Administration consented to forgive student debt for qualified borrowers participating in , , , and the .

What further stipulations are included in the agreement?

A condition of the agreement mandates that the Trump Administration must compensate any borrowers who submitted payments exceeding their required amounts.

Additionally, the federal government is obligated to submit six consecutive monthly progress reports, informing the court about the status of its application and loan cancellation processing.

What is the estimated number of borrowers impacted by this agreement?

Reports indicate that roughly 2.5 million individuals, currently enrolled in income-driven repayment plans—which tailor monthly payments according to income and family size—are expected to be impacted by this agreement.

What prompted the AFT to file a lawsuit?

The AFT, along with individual borrowers, initiated a lawsuit against the Department of Education in March, following the Trump Administration’s halt of student loan forgiveness for those participating in specific repayment plans.

Subsequent to the lawsuit’s filing, the federal government recommenced accepting applications for borrowers seeking enrollment in income-driven repayment plans, and later reinstated the processing of these applications.

Nevertheless, prior to the agreement finalized on Friday, the Administration had signaled it would not forgive student loan debt for individuals enrolled in certain income-driven repayment plans, a stance AFT described in a press release as being “despite a legal obligation to do so under federal law.”

“Today’s submission demonstrates that, for the first time publicly, the Trump administration has affirmed its intention to comply with the law and cancel student debt,” stated the AFT.