The Trump administration has announced that millions of Americans with student loan debt could once again qualify for loan forgiveness under certain repayment plans, following a new agreement between the government and the American Federation of Teachers. The deal comes after months of legal dispute over claims that federal authorities had wrongfully paused the processing of existing forgiveness applications.
The settlement, reached on October 17, restores the processing of applications for borrowers enrolled in the Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans. Under the terms, borrowers who have made the required number of qualifying payments will regain eligibility for cancellation, even if their applications were delayed or suspended earlier this year.
Borrowers will also have the opportunity to “buy back” months spent in deferment or forbearance, allowing those periods to count toward the forgiveness timeline. The agreement includes a key protection for those whose loans are forgiven before the end of 2025, ensuring they will not face unexpected tax bills due to the expiration of the student debt tax exemption set to end that year.
More than 2.5 million Americans are currently enrolled in ICR or PAYE plans, which are designed to adjust monthly payments based on income and family size. For many, the resumption of the forgiveness process could mean the cancellation of large portions of long-standing student debt. Teachers, public-sector workers, and employees of nonprofit organisations are among those most likely to benefit under the renewed programme.