U.S. President Donald Trump signed an executive order in the Roosevelt Room of the White House, marking a significant shift in the administration's approach to student loan forgiveness. This change follows an agreement between the U.S. Department of Education and the American Federation of Teachers (AFT), which will allow the resumption of student debt cancellation for millions of borrowers.
As part of this agreement, the Trump administration has stated that it will process loan forgiveness applications for eligible borrowers enrolled in two income-driven repayment plans: the Income-Contingent Repayment (ICR) plan and the Pay as You Earn (PAYE) plan. These programs will remain operational until they are phased out on July 1, 2028, as outlined in the administration's broader legislative framework.
The AFT had previously filed a lawsuit against the Trump administration in March, alleging improper blocking of student loan forgiveness programs mandated by law. Earlier this year, the administration had paused forgiveness under certain income-driven plans in light of a court ruling affecting a Biden-era program, the Saving on a Valuable Education (SAVE) plan. This pause had limited options for borrowers, leaving many uncertain about their repayment status.
According to estimates from higher education expert Mark Kantrowitz, over 2.5 million borrowers are currently in either the ICR or PAYE plans. The agreement also clarifies that borrowers qualifying for loan forgiveness in 2025 will not incur federal taxes on the canceled debt, as the current tax-free provision is set to expire at the end of the year.
The Education Department's response to inquiries regarding this agreement has not been immediately available. This development reflects ongoing tensions and negotiations surrounding student loan policies in the U.S.