Supporters are elated after the Trump administration agreed to a student loan forgiveness arrangement, offering relief to millions of borrowers—a surprising victory for a group seldom supported by the current White House.

Last week, the administration finalized an agreement with the American Federation of Teachers (AFT), reinstating student debt relief primarily for individuals who have been repaying their loans for the past two to three decades.

According to the deal, the Education Department will continue processing relief for borrowers under Income-Contingent Repayment and Pay As You Earn plans. These options are set to be phased out by 2028 under President Trump’s “Big, Beautiful Bill.”

The agreement also ensures that those who achieve student loan forgiveness through eligible payments this year will not face taxes on the relief, even if the cancellation occurs as late as 2026. However, starting in 2026, recipients of student debt relief will be required to pay taxes on the forgiven amount.

“This year, we challenged the Trump administration when it failed to comply with the law and denied borrowers the relief they deserved. Our agreement ensures that these borrowers, previously in limbo, can either receive immediate relief or finally find hope. Importantly, they won’t ever be taxed on this relief,” stated AFT President Randi Weingarten.

“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,” she added.  

The agreement came following a monthslong legal battle after the Trump administration paused student loan forgiveness under multiple income-driven repayment plans due to a separate fight in the courts.  

“The Biden Administration’s illegal attempts at mass student loan forgiveness impacted all of the Department’s income-driven repayment programs, including Income-Based Repayment. The courts intervened to stop their illegal efforts but that also impacted Department systems and prevented us from processing lawful loan discharges,” an Education Department spokesperson said. 

”Thanks to the Trump Administration’s efforts to separate out the illegal loan cancellation schemes, we are able to process legitimate loan cancellations once again for borrowers who have been making payments for the requisite number of years,” the spokesperson added.  

The deal also benefits those on the Public Service Loan Forgiveness Program, who will now have their applications processed for “buy backs,” meaning payments for months a borrower was in forbearance can count towards loan cancellation eligibility. 

For those on the Biden administration’s SAVE plan, advocates are encouraging those who have made 20 years of payment to call their loan servicer and see if they can switch to an IDR plan to be eligible for student loan forgiveness. 

“The court order, unfortunately, does not allow loan discharge for people enrolled in the SAVE plan,” said Sabrina Calazans, executive director of the Student Debt Crisis Center.  

Advocates say it could take weeks to see the fruits of this deal due to the federal shutdown, with 95 percent of Education Department employees currently furloughed. 

“We welcome student loan cancelation and debt relief for folks, especially those who have been in repayment and have done their due diligence and these repayment plans, and it’s, it’s long overdue for a lot of these families, especially in a time of financial and economic uncertainty and during a government shutdown,” Calazans said.  

Winston Berkman-Breen, legal director for Protect Borrowers, the group that represented AFT and others in court on this case, said another advantage of this agreement is the updates the Education Department will have to provide the court on the status of loan relief.  

“We’re really going to stay vigilant, and part of the agreement was to, once the government resumes, once the shutdown is over, file monthly status reports and updates with the court on the progress of their commitment. How many people are getting their loans canceled, How many people are in the queue to get their loans canceled, etc, and so we’ll be monitoring that over the next few months, and hopefully things go well, but if they don’t go well, we still have our case live in court and we’ll go back to the judge to get relief,” Berkman-Breen said. 

“It’s a really important accomplishment last week, but really, what it does is it tees us up to make sure that there’s transparency and court oversight as the Department of Education and the Trump administration start to deliver on what they promised,” he added.