AFT President Randi Weingarten celebrated the outcome, stating:
“Our agreement means that those 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.”
More Information
Status Report – #54 in AMERICAN FEDERATION OF TEACHERS v. U.S. DEPARTMENT OF EDUCATION (D.D.C., 1:25-cv-00802) – CourtListener.com
Trump Limits PSLF, Student-Loan Forgiveness for Public Servants – Business Insider
Student-Loan Forgiveness Delays Are Straining Millions of Borrowers – Business Insider
Avoiding a 2026 Tax Trap
Under the American Rescue Plan Act of 2021, student loan forgiveness is tax-free through 2025. Without this new agreement, borrowers receiving discharge after January 2026 could owe thousands in federal taxes.
To prevent that, the Department of Education will now use the eligibility date — the moment a borrower qualifies for discharge — rather than the official discharge date for tax purposes. This adjustment could save borrowers from owing additional taxes next year.
