Student Loan Forgiveness Resumes for Two Repayment Plans Following AFT-Trump Agreement

Millions of student loan borrowers will once again have access to debt forgiveness under two long-standing repayment programs, after the American Federation of Teachers (AFT) reached an agreement with the Trump administration. The U.S. Department of Education confirmed it will resume cancelling eligible borrowers’ loans under the Income Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans, which had been on hold earlier this year.

The Department of Education had suspended forgiveness under ICR and PAYE following a February court order that blocked a separate Biden-era repayment program, known as the Saving on a Valuable Education (SAVE) plan. Officials said that the ruling had broader implications, but consumer advocates and the AFT argued the decision did not apply to the older, well-established plans. In March, the AFT filed suit, accusing Trump officials of unlawfully denying borrowers relief guaranteed under their loan terms.

Under the new agreement, forgiveness will continue for borrowers enrolled in ICR and PAYE while the programs remain in effect. Both plans are income-driven repayment options that cap monthly payments based on a borrower’s discretionary income and discharge remaining debt after 25 years under ICR or 20 years under PAYE.

A student in a library | Source: Pexels

An estimated 2.5 million borrowers participate in these programs, according to higher education expert Mark Kantrowitz. However, the opportunity is limited: President Donald Trump’s “big beautiful bill” will phase out both ICR and PAYE on July 1, 2028.

Borrowers who had switched or planned to transfer to the Income-Based Repayment (IBR) plan can remain in their current programs to achieve forgiveness. “Now, they don’t have to do that,” said Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program. “They can remain in these plans and realize forgiveness.”