The Trump administration has agreed to resume student loan forgiveness for more than 2.5 million borrowers, a move that could inject billions of dollars back into the consumer economy just as the holiday season kicks off.

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The decision comes as part of a court settlement between Education Secretary Linda McMahon and the American Federation of Teachers, following a legal standoff over the administration's earlier freeze on key income-driven repayment plans.

The agreement reactivates both the Income-Contingent Repayment and Pay As You Earn programs, allowing them to continue operating until July 1, 2028.

Borrowers will not face tax bills on forgiven balances through 2025, averting a looming risk from changes in federal tax law that would have classified canceled loans as taxable ...