Trump admin agrees to cancel student loan debt for up to 2.5 million borrowers

The Trump administration has agreed to cancel billions in student loan debt for up to 2.5 million eligible borrowers following a federal court settlement regarding stalled income-driven repayment (IDR) programs. These programs tie monthly payments to a borrower's income and household size, forgiving remaining balances after 20 to 25 years of qualifying payments.

The agreement, filed on October 17 in federal court as part of the ongoing case American Federation of Teachers (AFT) v US Department of Education (DOE), reinstates Biden administration loan cancellations for borrowers enrolled in specific IDR plans, including Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), and Income-Based Repayment (IBR), Newsweek reported.

The AFT sued the Trump administration in March 2025, after President Trump reversed Biden-era student-loan forgiveness policies and issued an order to halt all IDR enrollment and processing. Applications to enroll in IDR plans were also removed from government websites. The AFT claimed in the suit that the Trump administration failed to provide Congressionally mandated debt relief.

"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," AFT President Randi Weingarten told Newsweek in a statement.

"Our agreement means that borrowers stuck in limbo can either get immediate relief or finally see a light at the end of the tunnel. And, crucially, they won't ever get taxed on that relief. The AFT will hold the federal government to its word, and we won't stop fighting until college is affordable and taking out a student loan doesn't trap millions of Americans in a ruinous and exploitative debt cycle."

The Department of Education began notifying borrowers eligible for relief in October, with emails including options to accept forgiveness or opt out, according to the paper.