Borrowers of Student Loans File Lawsuit Against Trump Administration for Obstructing Loan Cancellation and Affordable Repayment Options
Fed Up Borrowers Take Legal Action Against Administration
America's educators are fighting back against the Trump administration's bid to restrict student loan forgiveness and affordable repayment options. On Tuesday, the American Federation of Teachers (AFT), in alliance with the Student Borrower Protection Center and Berger Montague, filed a lawsuit against the government for obstructing millions of borrowers from accessing beneficial repayment plans and forgiveness programs authorized by law.
This lawsuit arrives as the federal student loan repayment system faces chaos. Millions of borrowers have been trapped in forbearance for months due to a legal dispute connected to the SAVE plan, an income-driven repayment program launched by the Biden administration two years ago. The aftermath of this legal battle is now affecting an even broader group of borrowers since the Trump administration blocked access earlier this month to all income-driven repayment programs, including the Income-Based Repayment plan, posing a threat to borrowers' pursuit of Public Service Loan Forgiveness. Both the Department of Education and IBR plan are legal requirements under laws passed by Congress, and IBR and PSLF are not subject to any ongoing legal challenge. Other borrowers report escalating monthly payments as they're prevented from signing up for affordable income-driven plans or recertifying their income, as mandated by law.
"In an attempt to make life difficult for working people, the new administration seems intent on causing more trouble for more than 45 million student loan borrowers who took out loans to further their education," stated AFT President Randi Weingarten in a Wednesday statement. "While the former president attempted to fix the system, the current president is needlessly breaking it, resulting in potential harm to borrowers because of this illegal and immoral decision to deny borrowers' rights under the law."
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Education Department Hampers Student Loan Forgiveness and Affordable Repayment for Millions
Prior to this year, federal student loan borrowers had access to four separate income-driven repayment plans. Congress initially granted the creation of student loan repayment plans tied to a borrower's income in 1993, leading to the foundation of the Income-Contingent Repayment plan. The Department of Education established the plan's regulations the following year, and used a similar process to create the PAYE and REPAYE plans, the latter of which became the SAVE plan under the Biden administration. Separate legislation in 2007 passed by Congress intended the creation of the IBR plan. All of these income-driven plans employ formulas based on a borrower's income, offering loan forgiveness of any leftover balance after a fixed repayment term of 20 or 25 years.
Congress established the PSLF program in 2007 as well. PSLF offers loan forgiveness in as few as ten years for borrowers committed to working for nonprofit or government employers, where they typically earn lower incomes than in similar roles within the private sector. Teachers, nurses, public defenders and prosecutors, law enforcement officers, and military service members can all qualify for the program. PSLF requires most borrowers to repay their loans under an income-driven repayment plan in order to qualify for loan forgiveness. While PSLF is technically a separate program, it often works hand in hand with income-driven repayment.
Earlier this month, the Department of Education blocked access to all income-driven repayment plans following a new ruling by the 8th Circuit Court of Appeals amidst an ongoing legal dispute over the SAVE plan. A group of Republican-led states had filed suit nearly a year ago to try and block the SAVE plan, arguing it was an unjustified overreach by the Biden administration. In its most recent ruling, the 8th Circuit expanded its preliminary injunction blocking the SAVE plan, affecting more than eight million borrowers who remain in a forbearance, preventing them from making progress toward loan forgiveness, including under PSLF. The court hinted that student loan forgiveness at the end of the repayment term for the ICR and PAYE plans might be improper (though regulations, loan contract language, and public promises made to borrowers have stood for three decades), but did not issue any ruling officially blocking these plans or striking them down. Additionally, the court did not enjoin PSLF or prevent the Department of Education from allowing borrowers to enroll in IBR.
By effectively blocking access to all income-driven repayment plans, including IBR, the Trump administration has thrown the federal student loan repayment system into disarray. New graduates wishing to join any income-driven repayment plan can no longer apply. Borrowers stuck in the SAVE plan forbearance who aim to switch to IBR, ICR, or PAYE to resume progress toward loan forgiveness through PSLF are unable to do so. And borrowers required to recertify their income for an existing repayment plan, annually mandated under federal law, are being prevented from doing so, resulting in unexpected, devastating increases in their monthly payments.
Borrowers Sue Education Department for Barring Affordable Payment Plans and Student Loan Forgiveness
On Tuesday evening, the AFT and SBPC filed a lawsuit against the Education Department in federal district court in Washington, D.C. The complaint alleges that the Trump administration's actions illegally prevent millions of student loan borrowers from accessing income-driven repayment plans and PSLF, programs that the department is obligated to provide by statute and are not hindered by any injunction.
"Congress provided clear and detailed instructions to the Department to ensure millions of Americans could repay their loans without being inconvenienced by the debt," reads the complaint. "Specifically, Congress directed the ED to offer income-driven repayment (IDR) plans that tie a borrower's monthly payment to their income. Despite this unambiguous Congressional command, the Department has chosen to eliminate access to all income-driven repayment plans, providing no indication when-if ever-it will restore them. The result: borrowers are unable to access affordable monthly payment plans, some borrowers are being pushed into default on their debt, and some public service workers are being denied their statutory right to lower their monthly payment and earn credit towards Public Service Loan Forgiveness (PSLF)."
The complaint draws attention to the suspension of the federal student loan income-driven repayment system occurring at a time when Trump administration officials have expressed their desire to shutter the Department of Education. The lawsuit seeks a declaration that the Education Department is unlawfully blocking ICR, IBR, and PSLF, in violation of federal law, and injunctive relief to reinstate these programs and cease collections activities against student loan borrowers in the interim.
Additional Turmoil at the Education Department Threatens Student Loan Forgiveness Programs
The latest legal challenge comes just a week after the Education Department implemented drastic layoffs, effectively decimating its workforce. According to the department, the cuts affect every unit and division within the department. The Office of Federal Student Aid, which manages the entire Direct federal student loan system, among other responsibilities such as supervising federal student loan forgiveness and income-driven repayment programs, has also been affected.
The Trump administration claims that critical department operations will continue to function, stating, "The Department of Education will continue to fulfill all statutory programs within the agency's jurisdiction, including formula funding, student loans, Pell Grants, special education funding, and competitive grantmaking."
However, a coalition of Democratic-led state attorneys general quickly filed a legal challenge last week, arguing that these drastic job cuts constitute an illegal shutdown of the Department of Education without subsequent congressional approval.
"This massive RIF is not supported by any actual rationale or specific determinations about eliminating supposed waste within the Department-rather, the RIF is part of President Trump's and Secretary McMahon's opposition to the Department of Education's existence," reads the complaint, which was filed in federal district court in Massachusetts. "The Trump Administration cannot dismantle the Department of Education. It cannot override-whether through mass layoffs or otherwise-the statutory framework outlining the Department's responsibilities."
Ultimately, student loan borrowers "only aspire to repay their student loans according to the terms that Congress and their contracts provide," said the AFT in its lawsuit filed on Tuesday. "Therefore, AFT, on behalf of itself and its members, brings this lawsuit to compel the Department to abide by congressional mandates and make available the resources for borrowers to re-pay their loans through the affordable, income-driven repayment plans and access student loan forgiveness programs that the Department of Education is obligated to offer."
- The lawsuit filed by the AFT, Student Borrower Protection Center, and Berger Montague against the government alleges that the Trump administration's blocking of access to income-driven repayment plans and student loan forgiveness programs authorized by law is illegal.
- The 8th Circuit Court of Appeals' ruling, which expanded its preliminary injunction blocking the SAVE plan and affected more than eight million borrowers, also inadvertently blocked access to all income-driven repayment plans, including IBR and PSLF.
- Borrowers who are unable to access income-driven repayment plans risk unexpected, devastating increases in their monthly payments, as they are prevented from recertifying their income, which is a federal law mandate.
