The Trump administration has agreed to accelerate student loan forgiveness under a new court-supervised deal with the American Federation of Teachers (AFT), marking a major victory for borrowers awaiting long-promised debt relief.
The agreement, part of the AFT v. U.S. Department of Education case, requires the Education Department to speed up cancellations for borrowers in income-driven repayment and Public Service Loan Forgiveness (PSLF) programs. It also protects them from unexpected tax bills tied to forgiven debt in 2025.
“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,” said AFT President Randi Weingarten. “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.”
According to the filing, the administration will discharge eligible borrowers’ remaining balances and reimburse payments made after eligibility. Borrowers whose loans are canceled by Dec. 31, 2025, will not face IRS taxation on the forgiven amount.
Winston Berkman-Breen, legal director for Protect Borrowers, called the settlement “a tremendous win for borrowers,” adding that the Education Department has “agreed to follow the law and deliver congressionally mandated affordable payments and debt relief… under court supervision.”
The AFT said the deal helps prevent a looming 2026 “tax bomb” that would have penalized borrowers because of bureaucratic delays. The administration must file six monthly progress reports to ensure transparency in the forgiveness rollout.
