Lawyers are happy after Trump administration’s consent student loan forgiveness The deal would provide relief to millions of borrowers, a rare cheer for a group that has found few defenders in the current White House.
The administration reached an agreement last week with the American Federation of Teachers (AFT) that restarts student loan relief, mostly for those who have been paying off their loans for the last 20 to 25 years.
The agreement states that the Education Department will continue to process relief for borrowers in income-contingent repayment and pay-as-you-go plans under President Trump’s “big, beautiful bill” until the option expires in 2028.
It also allows people who earn student loan forgiveness through qualifying payments this year to avoid taxes on the loan relief, even if cancellation doesn’t happen until 2026. Starting in 2026, people who receive student loan relief will have to pay taxes on that money.
“This year, we took the Trump Administration to task when it refused to follow the law and denied borrowers the relief they are owed. Our agreement means borrowers stuck in limbo can either get immediate relief or finally see light at the end of the tunnel. And, importantly, they will never be taxed on that relief,” said AFT President Randi Weingarten.
He said, “AFT will hold the federal government to its word, and we will never stop fighting until college is affordable and student loans do not trap millions of Americans in a destructive and exploitative debt cycle.”
The settlement followed a months-long legal battle after the Trump administration blocked student loan forgiveness under the multiple Income-Driven Repayment Plans Due to a separate battle in the courts.
A Department of Education spokesperson said, “The Biden administration’s illegal efforts at mass student loan forgiveness affected all of the Department’s income-driven repayment programs, including income-based repayment. The courts intervened to stop their illegal efforts, but it also overwhelmed the Department’s systems and prevented us from processing legitimate loan discharges.”
“Thanks to the Trump Administration’s efforts to dismantle illegitimate loan cancellation schemes, we are able to once again process legitimate loan cancellation for borrowers who have been making payments for the required number of years,” the spokesperson said.
The deal will also benefit those in the Public Service Loan Forgiveness Program, whose applications will now be processed for “buy-back,” meaning the months for which the borrower was in the forbearance can count toward eligibility for loan cancellation.
For the people of the Biden administrationsavings planAdvocates are encouraging people who have made 20 years of payments to call their loan servicer and see if they can switch to an IDR plan to be eligible for student loan forgiveness.
“Unfortunately, the court order does not allow debt discharge for those enrolled in the SAVE plan,” said Sabrina Callazans, executive director of the Student Loan Crisis Center.
Advocates say it could be weeks before the deal bears fruit because of the federal shutdown, with 95 percent of Education Department employees currently furloughed.
“We welcome student loan cancellation and debt relief for people, especially those who are in repayment and have done their due diligence and these repayment plans, and this, for many of these families, is long overdue, especially in this time of financial and economic uncertainty and during the government shutdown,” Callazan said.
Winston Berkman-Breen, legal director of Protect Borrowers, the group representing AFT and others in court on this case, said another advantage of the agreement is that the Education Department will have to provide updates to the court on the status of debt relief.
“We will be really vigilant, and part of the agreement was that, once the government reopens, once the shutdown is over, file monthly status reports and updates with the court on the progress of our commitment. How many people are getting their loans canceled, how many people are in the queue to get their loans canceled, etc., and so we will monitor that over the next few months, and hopefully things will go well, but if they don’t go well, Our case is still in court and we will go back to the judge to seek relief,” Berkman-Breen said.
“This is a really significant accomplishment this past week, but really, it motivates us to make sure that there is transparency and court oversight as the Department of Education and the Trump administration begin to deliver on what they promised,” he said.
