Students Seek Loan Forgiveness Before 2026 to Prevent Immediate Harm
The American Federation of Teachers (AFT) has taken legal action against the Department of Education, filing a motion for a preliminary injunction to force the department to unblock student loan forgiveness before January.
The AFT's lawsuit, which seeks class action status, alleges that the Department of Education is violating federal law by blocking millions of borrowers from receiving student loan forgiveness across several programs. The AFT argues that this blockage is causing borrowers to consider bankruptcy, forgo necessities, and experience distress.
One of the primary issues at hand is the department's withholding of Income-Driven Repayment (IDR) and Public Service Loan Forgiveness (PSLF) benefits. The AFT claims that this withholding is preventing borrowers from accessing these essential programs, leading to potential tax consequences in the future.
The department has a significant application backlog for IDR plans, which grew to around two million after the department temporarily stopped processing IDR applications earlier this spring. The department has also rejected or will be rejecting approximately 460,000 IDR requests where borrowers submitted an earlier version of the IDR application and either selected the SAVE plan or an option to have their loan servicer pick their plan for them.
The department is also denying student loan forgiveness to borrowers in the IBR, PAYE, and ICR plans who have reached the 20- or 25-year threshold. This denial, according to the AFT, is preventing borrowers from getting relief now, while tax relief remains in place, and could lead to severe tax consequences next year.
Loan balances subject to cancellation under IDR could far exceed $100,000, potentially leading to 'devastating tax consequences' if not cancelled by the end of the year. The AFT's updated lawsuit also notes that the 'One Big, Beautiful Bill' allows tax relief for IDR student loan forgiveness to expire at the end of this year, making forgiveness taxable again starting January 1, 2026.
The department has not yet formally responded to the AFT's amended complaint or the motion for a preliminary injunction. A formal hearing is likely to be scheduled sometime in November, with a decision possibly issued sometime after that. The department's responses and the AFT's reply are due in October.
The timeline for relief for borrowers pursuing PSLF remains less clear, but borrowers should get more clarity as the litigation progresses through the fall. The department is denying borrowers student loan forgiveness under the PSLF program by continuing to block or delay access to IDR and failing to sufficiently process PSLF Buyback applications.
The department claims it is making progress on the backlog of submitted IDR applications, but this progress was initiated by the Biden Administration, not the Trump administration. However, the AFT argues that many student loan borrowers will suffer imminent or irreparable harm without immediate relief.
This legal battle could have significant implications for millions of student loan borrowers across the United States, and it will be interesting to see how the court responds to the AFT's motion for a preliminary injunction.
