Some Student Loan Forgiveness Blocked By Trump Administration Resumes: What To Know

The Trump administration has agreed to resume federal student loan forgiveness for about 2.5 million borrowers in a settlement of a lawsuit filed by the American Federation of Teachers.

Under the agreement reached earlier this month between the teacher union and the administration, the Education Department will process loan forgiveness for those eligible in certain repayment plans that offer lower monthly payments based on a borrower’s earnings.

The AFT, which represents some 1.8 million union members, filed a lawsuit against Trump officials in March, accusing them of blocking federal student loan holders from programs mandated in their original borrowing terms.

Earlier this year, the Trump administration blocked student loan forgiveness under certain income-driven repayment plans, citing its interpretation of court decisions as the reason.

What Specific Plans Are Affected?

According to the deal, the Trump administration must cancel student debt for eligible borrowers enrolled in the following plans: income-driven repayment (IDR) plans, income-contingent repayment plans, Pay As You Earn (PAYE), and Public Service Loan Forgiveness (PSLF) plans.

In addition to the 2.5 million borrowers enrolled in IDR plans — which set a borrower’s monthly bill at a share of their discretionary income and cancel any remaining debt after a certain period, usually 20 years or 25 years — the deal covers 70,000 people who are waiting for forgiveness through the PSLF program.

The PSLF program, which has been in place since 2007, forgives federal student loans for borrowers who have worked at non-profit organizations or in public service after 120 payments, or 10 years. The Biden administration also created an option for borrowers to “buy back” months of payments they missed during forbearance or deferment in 2023, to allow more people to qualify for that forgiveness.

To determine if you qualify for a buy-back under the PSLF program, consult this page at the Education Department.

Key Deal Components

If borrowers have made payments beyond what was needed for forgiveness, those payments will be reimbursed. The Education Department must also continue to process IDR and PSLF “buyback” applications.

Balances forgiven before Dec. 31 will not be treated as taxable income, as they will in 2026 due to a recent change in tax law.

The administration must also file progress reports every six months with the court to show the pace of application processing and loan forgiveness, according to the AFT.

Ed Department Continues Review

“We took on the Trump administration when it refused to follow the law and denied borrowers the relief they were owed,” AFT President Randi Weingarten said in a statement. “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.”

The Education Department said the Trump administration is reviewing forgiveness programs to identify ones that were not affected by court rulings that blocked much of the Biden administration’s efforts to cancel student debt.

“The Administration looks forward to continuing its work to simplify the student loan repayment process through implementation of the President’s One Big Beautiful Bill Act,” the department said in a statement.

With Shutdown, ‘Keep Really Good Records’

Even with the agreement in place, mass layoffs at the Education Department could factor into processing times for forgiveness, Megan Walter, senior policy analyst at the National Association of Student Financial Aid Administrators, told The Associated Press.

If borrowers continue to make payments while their application is pending forgiveness, that will be refunded to them if they are successful, Walter said. “But keep really good records,” she said.

The Associated Press contributed reporting.