Trump Administration Moves to Resume Federal Student Loan Forgiveness Processing
Published November 03, 2025
By AACOM Government Relations
Federal Policy Financial Aid Higher Education OME Advocate
- On Oct. 17, 2025. the Trump administration and the American Federation of Teachers (AFT) reached a court-supervised settlement, pending final court approval, to resume federal student loan cancellation under income-driven repayment (IDR) plans and protect borrowers from tax penalties. The class action effort is part of an amendment to AFT’s initial legal action against the Trump administration in March.
- The settlement requires the administration to cancel debt for all eligible borrowers in Income-Based Repayment, Income-Contingent Repayment, Pay As You Earn and PSLF programs. The administration must also issue refunds to borrowers who made payments after becoming eligible for cancellation under IDR.
- Borrowers receiving forgiveness by Dec. 31, 2025, will not face tax liability, and the administration must submit monthly progress reports to the court on cancellations and processing.
- AACOM will provide additional updates, and borrowers are encouraged to review announcements from Federal Student Aid, including changes to loan repayment programs as implemented through the OBBBA.