In a significant turn of events, the Trump administration has agreed to reinstate student loan forgiveness plans, which had been partially obstructed during legal proceedings.
This agreement was reached with the American Federation of Teachers (AFT), one of the largest teachers' unions in the country. The Department of Education will now commence the cancellation of student loans for borrowers who are enrolled in income-driven repayment plans.
Winston Berkman-Breen, the legal director for Protect Borrowers, a group that served as counsel for the AFT, hailed the development as a significant victory for borrowers. "This is a tremendous win for borrowers. With today's filing, borrowers can rest a little easier," he stated.
The AFT had earlier in the year filed a lawsuit against the Trump administration. The bone of contention was the Department of Education's alleged obstruction of student loan holders from utilizing repayment and forgiveness programs that were in operation when they initially borrowed funds.
As reported by Breitbart, the Trump administration had earlier this year put a halt to student loan forgiveness under certain income-driven repayment (IDR) plans. These IDR plans are designed to calculate a borrower's monthly payment based on their salary and family size, with some plans offering the possibility of having the remaining balance forgiven after a certain number of payments have been made.
The Department of Education initially defended its decision to pause the programs, citing a court order that blocked the Biden administration's Saving on Valuable Education plan (SAVE), another income-driven repayment program. During this pause, borrowers were left with only one repayment option that could result in loan forgiveness, known as the Income-Based Repayment plan (IBR).
However, after several months of court proceedings, the Trump administration changed its stance and negotiated an agreement with the AFT for the reinstatement of the IDR plans.
AFT President Randi Weingarten expressed her satisfaction with the agreement, stating, "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." She added, "This year, we took on the Trump administration when it refused to follow the law and denied borrowers the relief they were owed. 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.
The new agreement is applicable to all borrowers enrolled in income-based repayment, income-contingent repayment, pay-as-you-earn payment plans, and the Public Service Loan Forgiveness program.
According to the agreement, "Eligible borrowers must make a set number of minimum payments required under their respective repayment plans before their debt is forgiven." The Trump administration has also agreed to provide refunds to borrowers who made additional payments beyond their date of eligibility for cancellation through income-driven repayments.
The Trump administration has confirmed that borrowers who become eligible for student loan forgiveness in 2025 will not owe federal taxes on the relief under the new agreement. This is a significant departure from the current tax law, which would tax borrowers on the forgiven amount as if it were income, potentially costing borrowers thousands of dollars.
The joint agreement is still subject to court approval before it can be implemented. The timeline for this approval is not immediately known. If the court approves the deal, the Trump administration would be required to file six monthly reports on the status of its loan cancellation processing.
This case, No. 1:25-cv-802, is currently before the U.S. District Court for the District of Columbia. The outcome of this case could have far-reaching implications for student loan borrowers across the country, offering them a much-needed reprieve from the burden of student loan debt.
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