Trump Administration Reaches Major Student Loan Relief Deal Benefiting Millions
New agreement with AFT restores forgiveness programs, adds tax relief, and offers long-awaited support for long-term borrowers.
The administration of President Donald Trump has announced a new agreement with the American Federation of Teachers (AFT) that paves the way for long-awaited student loan relief, potentially benefiting millions of borrowers across the United States.
According to Money Wise, the agreement allows the Department of Education to resume loan forgiveness processes for those enrolled in income-driven repayment (IDR) programs, Pay As You Earn (PAYE), and Public Service Loan Forgiveness (PSLF)—especially borrowers who have been repaying their loans gradually for more than two decades. These programs will remain active until 2028 before being phased out under Trump’s “Comprehensive and Beautiful Act.”
Tax-Free Loan Forgiveness Offers Relief, but Processing Delays Expected
The agreement also includes a significant tax exemption: borrowers who receive forgiveness this year will not pay taxes on the canceled debt, even if the forgiveness does not take effect until 2026. After that, forgiven balances will once again be considered taxable income. Winston Berkman-Breen, legal director of the Student Borrower Protection Center, described the agreement as “a major win for borrowers,” emphasizing that the Department of Education is committed to applying the law and reducing debt burdens for public-sector workers.
However, experts warn that the relief will not be immediate. Megan Walter, senior policy analyst at the National Association of Student Financial Aid Administrators, told ABC News that staffing shortages and layoffs at the Department of Education may slow the review and processing of applications. She advised borrowers to keep accurate and organized records, noting that those who continue paying during the review process will be refunded if their forgiveness is approved.
How to Check Your Eligibility
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Log in to your Federal Student Aid (FSA) account through studentaid.gov.
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Check your loan type and repayment plan.
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Ensure your contact information is updated.
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Monitor your email—eligible borrowers will receive notifications from the Department of Education this month.
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Keep accurate records of every payment, including statements or screenshots.
If you are not eligible but still overwhelmed by debt, you may consider alternative solutions such as consumer debt relief programs (credit cards and personal loans) or using budgeting apps like Rocket Money to track expenses and reduce unnecessary subscriptions. Companies like Freedom Debt Relief can also negotiate with creditors to settle debts through a single monthly payment.
This agreement represents a major step forward in the student loan debate, but it also raises new questions about the future of forgiveness programs, especially as their gradual phase-out approaches in 2028.
