Trump Admin Agrees to More Student Loan Forgiveness in Deal with Teachers Union

The Trump administration reached an agreement with the American Federation of Teachers (AFT) on Friday to reinstate student loan forgiveness plans after partially blocking them during litigation. 

Under the agreement, the Department of Education will begin canceling student loans for borrowers enrolled in income-driven repayment plans, the New York Post reported.

“This is a tremendous win for borrowers. With today’s filing, borrowers can rest a little easier,” said legal director for Protect Borrowers Winston Berkman-Breen. Protect Borrowers acted as counsel for the AFT, one of the nation’s largest teachers unions.

The AFT filed a lawsuit against the Trump administration in March, accusing the Department of Education of blocking those with student loans from using repayment and forgiveness programs that were active when they first borrowed funds. 

Earlier this year, the Trump administration halted student loan forgiveness under certain income-driven repayment (IDR) plans. IDR plans calculate a borrower’s monthly payment based on salary and family size, and some plans allow borrowers to have their remaining balance forgiven after satisfying a certain number of payments.

The Education Department initially argued it could pause the programs because of a court order blocking the Biden administration’s Saving on Valuable Education plan (SAVE), which is another income-driven repayment program, according to the report.

During the pause, borrowers were left with only one repayment option resulting in loan forgiveness, called the Income-Based Repayment plan (IBR).

But after months in court, the Trump administration shifted and negotiated an agreement with the AFT for the return of the IDR plans.

“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 said in a statement. “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.”

The new agreement applies to all borrowers enrolled in income-based repayment, income-contingent repayment, pay-as-you-earn payment plans, and the Public Service Loan Forgiveness program, according to the AFT. 

“Eligible borrowers must make a set number of minimum payments required under their respective repayment plans before their debt is forgiven,” according to the report. “The Trump administration also agreed to provide refunds to borrowers who made additional payments beyond their date of eligibility for cancellation through income driven repayments. Additionally, the government would process buyback applications for IDR and PSLF, including from borrowers without a partial financial hardship, a requirement eliminated by Trump’s Big Beautiful Bill Act.”

Per the Post, the Trump administration confirmed borrowers who become eligible for student loan forgiveness in 2025 will not owe federal taxes on the relief under the new agreement.

Under current tax law, borrowers with loans discharged in 2026 and onward would be taxed on the forgiven amount as if it were income, which could cost borrowers thousands of dollars. Under the new agreement, the Department of Education would  respect the original date a borrower qualifies to have their debt forgiven through an IDR plan, rather than when the government process it — meaning borrowers eligible on or before Dec. 31, 2025 will not be bombarded with a giant tax bill because of processing delays caused by the government shutdown or ongoing court battles. 

The joint agreement must be approved by the court before it can go into effect. The timeline for approval is not immediately known, according to the report. 

If the court approves of the deal, the Trump administration would be required to file six monthly reports on the status of its loan cancellation processing. 

The case is American Federation of Teachers v. U.S. Department of Education, No. 1:25-cv-802 in the U.S. District Court for the District of Columbia. 

Katherine Hamilton is a political reporter for Breitbart News. You can follow her on X @thekat_hamilton.