Trump Administration to Expedite Student Loan Forgiveness Programme Under Court Deal

The Trump Administration will speed up student loan cancellation for those under income-driven repayment (IDR) programmes, which will shield borrowers from unexpected tax bills next year.

The development comes after the American Federation of Teachers (AFT) reached a deal in the AFT versus US Department of Education case over the government's obligation to forgive student debt for those who have made payments for decades under federal law.

The new agreement, which is awaiting court approval, requires the US Education Department to forgive debt for eligible borrowers in 2025 and ensure they do not face a surprise tax bill due to bureaucratic delays.

'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,' AFT President Randi Weingarten stated. 'This year, we took on the Trump administration when it refused to follow the law and denied borrowers the relief they were owed. 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. And, crucially, they won't ever get taxed on that relief.'

Weingarten added that the AFT will not stop fighting until college is affordable and student loans do not trap Americans in a 'ruinous and exploitative debt cycle.'

To be specific, the Trump administration must cancel student loans for all eligible borrowers enrolled in income-driven repayment, income-contingent repayment, Pay As You Earn, and Public Service Loan Forgiveness (PSLF) programmes. Borrowers whose student loans are cancelled on or before 31st December will not receive IRS forms treating the forgiven balances as taxable income.

US President Donald Trump's 'Big, Beautiful Bill' will phase out the Income-Contingent Repayment and Pay as You Earn programmes by 1st July 2028. A higher education expert forecasts that these programmes have over 2.5 million people enrolled.

According to the AFT, the administration must also file six monthly progress reports with the court, revealing the speed of application processing and loan discharges.

'This is a tremendous win for borrowers,' Winston Berkman-Breen, the legal director for Protect Borrowers, had stated. 'With today's filing, borrowers can rest a little easier knowing that they won't be unjustly hit with a tax bill once their student loans are finally cancelled, pursuant to federal law.'

The AFT and many individual student borrowers filed a lawsuit in March 2025 after the Trump administration removed IDR enrollment applications from federal websites and directed loan servicers to stop processing them.

The Education Department resumed debt forgiveness in early October after months of pause. Many eligible student borrowers started receiving emails from the department, notifying them they qualify for debt cancellation.

The emails, which were reviewed by multiple media outlets, had the subject line: 'You're eligible to have your student loan(s) discharged.'

The emails further stated that the department is working with the borrower's servicer to process the relief over the coming months. The Education Department will also send their discharge details to the servicer after 21st October.