The American Federation of Teachers (AFT) has reached a deal with the United States Department of Education under which the Trump administration has agreed to resume processing student loan forgiveness.

This agreement would benefit around 2.5 million borrowers enrolled in certain income-based and public-service repayment plans. Previously, the Trump administration stopped providing student loan forgiveness under those plans based on its interpretation of a different court decision, Associated Press reports.

The move follows a lawsuit filed by the union challenging the administration’s prior refusal to provide relief.

Under the agreement, the department will expedite loan-forgiveness processing for borrowers in designated repayment programmes such as income-driven repayment (IDR) plans, income-based repayment plans, the Pay As You Earn (PAYE) plan and the Public Service Loan Forgiveness (PSLF) scheme.

A key element of the deal is that borrowers who have already met eligibility criteria will not be treated as having taxable income on balances forgiven before December 31. Previously, forgiven debt was projected to be taxable starting in 2026 thanks to a change in tax law.

Additionally, the education department will refund any payments made beyond what was required for forgiveness, and it must now file six-monthly progress reports with the court to demonstrate the pace of processing.

AFT President Randi Weingarten celebrated the deal as delivering relief to borrowers long denied it, saying, “We took on the Trump administration when it refused to follow the law and denied borrowers the relief they were owed.”

Despite the agreement, several experts worry that the mass layoffs at the Education Department may affect forgiveness processing times.