In a move that many borrowers are celebrating, the Trump administration has agreed to a court-supervised plan that will speed up student loan forgiveness under income-driven repayment programs. This agreement, made with the American Federation of Teachers (AFT), is a major victory for those who have been burdened by decades of student loan payments.
The agreement, which is currently awaiting court approval, outlines a clear path for the Education Department to cancel student debt for eligible borrowers by 2025, while ensuring they won't face an unexpected tax penalty due to bureaucratic delays. For years, borrowers have been waiting for the relief they were promised, and now they will finally see that promise fulfilled.
Randi Weingarten, President of the AFT, expressed her satisfaction with the deal, saying, “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.” While Weingarten took aim at the previous administration’s refusal to follow through on debt cancellation, this new agreement ensures borrowers will get the relief they were owed—without any surprise tax bills.
Under the agreement, the Department of Education will cancel debt for all eligible borrowers enrolled in programs like Income-Driven Repayment (IDR), Pay As You Earn, and Public Service Loan Forgiveness (PSLF). Even better, borrowers who make payments after becoming eligible for cancellation will be reimbursed, ensuring that no one is left behind due to delays or missteps.
The deal also includes a crucial provision for borrowers whose loans are canceled before December 31, 2025: they will not face any IRS penalties or taxes on the forgiven balances, a major concern for many who feared a tax "bomb" as the law changes in 2026.
Winston Berkman-Breen, legal director for Protect Borrowers, called it a “tremendous win for borrowers,” adding that this agreement will allow borrowers to breathe easier knowing they won’t be penalized for government delays.
While the AFT has been a vocal critic of past inaction, the agreement shows that progress is being made—and borrowers will finally see the relief they were promised. With this agreement, the Education Department is now required to file six monthly progress reports with the court, showing just how quickly they’re processing applications and discharging loans.
In the end, this is a win for hardworking Americans who have long been trapped in a cycle of student loan debt. Under the Trump administration, they’re finally getting the relief they deserve—without the added burden of tax penalties.
