U.S. to Cancel Debt for Millions via Income-Driven Plans
The U.S. government announced it will cancel federal student loan debt for millions of borrowers enrolled in income-driven repayment (IDR) plans, following a legal settlement between the American Federation of Teachers (AFT) and the U.S. Department of Education.
Details of the Agreement
The agreement requires the Department of Education to resume processing forgiveness for eligible borrowers enrolled in IDR plans such as Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE). The deal also ensures that borrowers who qualify for forgiveness in 2025 will not be taxed on the forgiven debt.
Background and Legal Context
Earlier this year, student loan forgiveness under certain IDR plans was paused amid a court challenge targeting the SAVE plan. This settlement restores the relief process for borrowers who had met the required payment thresholds under IDR prior to the pause.
Borrower Impact
Millions of borrowers who have made 20- or 25-year qualifying payments under IDR plans will now be eligible for debt cancellation. The Department will also issue refunds to those who made extra qualifying payments before their eligibility date.
