❓WHAT HAPPENED: The Trump administration agreed to cancel billions in student loan debt for up to 2.5 million borrowers as part of a federal court settlement over stalled income-driven repayment (IDR) programs.
👤WHO WAS INVOLVED: The American Federation of Teachers (AFT), the Trump administration, and the U.S. Department of Education (DOE).
📍WHEN & WHERE: The settlement was filed on October 17, 2025, in federal court as part of the American Federation of Teachers (AFT) v. U.S. Department of Education case.
💬KEY QUOTE: “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.” – Randi Weingarten, AFT President
🎯IMPACT: Borrowers eligible for relief are being notified, with options to accept forgiveness or opt out, according to the Department of Education.
The Trump administration has agreed to cancel billions of dollars in federal student loan debt for as many as 2.5 million borrowers, following a federal court settlement in the case American Federation of Teachers (AFT) v. U.S. Department of Education. The settlement, filed on October 17, reinstates loan forgiveness provisions tied to income-driven repayment (IDR) programs, including Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), and Income-Based Repayment (IBR). These plans cap monthly payments based on income and household size, and forgive remaining balances after 20 to 25 years of qualifying payments.
The agreement comes after the AFT sued the Trump administration in March 2025, claiming it had unlawfully reversed Joe Biden-era loan forgiveness initiatives. According to the lawsuit, the Department of Education, under President Trump, removed IDR enrollment applications from federal websites and directed servicers to stop processing new enrollments and forgiveness applications. The AFT argued that this violated federal law by denying borrowers access to debt relief guaranteed by Congress.
“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 in a statement. “Our agreement means that 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. The AFT will hold the federal government to its word, and we won’t stop fighting until college is affordable and taking out a student loan doesn’t trap millions of Americans in a ruinous and exploitative debt cycle.”
The Department of Education began notifying eligible borrowers in October, sending emails that offer the option to accept forgiveness or opt out. Borrowers who receive forgiveness by the end of 2025 will not face federal income taxes on the discharged debt, under provisions maintained from previous legislation.
This settlement comes amid broader changes to the Department of Education under Trump. In March 2025, the president signed an executive order directing the department’s dismantling, aiming to return educational authority to states and local governments.
Earlier that year, the department eliminated over $600 million in funding for teacher training programs which promoted “divisive ideologies,” including diversity, equity, and inclusion (DEI) initiatives. As part of this shift, the department’s workforce has also been significantly reduced.
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