The Trump administration has reached a federal court settlement to cancel billions in student loan debt for up to 2.5 million borrowers, reinstating provisions tied to income-driven repayment (IDR) programs. The agreement, filed on October 17, 2025, in the case American Federation of Teachers (AFT) v. U.S. Department of Education, revives eligibility for forgiveness under plans such as Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), and Income-Based Repayment (IBR). These programs cap monthly payments based on income and household size, with remaining balances forgiven after 20 to 25 years of qualifying payments.
The settlement followed a lawsuit filed by the AFT in March 2025, alleging that the Trump administration unlawfully blocked access to IDR enrollment and forgiveness applications. According to the lawsuit, the Department of Education removed IDR applications from federal websites and halted processing new enrollments, violating federal law by denying borrowers debt relief guaranteed by Congress.
AFT President Randi Weingarten praised the settlement, 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 the end of 2025 will not face federal income taxes on discharged debt, per existing legislation.
The agreement comes amid broader changes to the Department of Education under Trump, including an executive order to dismantle the agency and reduce funding for teacher training programs linked to “divisive ideologies.”
