Donald Trump’s Education Secretary blasted by a new lawsuit over ‘unlawful’ student loan forgiveness delays

The American Federation of Teachers (AFT) has just filed a new lawsuit, asking a federal judge to force Trump’s U.S. Department of Education to get its act together and cancel the debts of borrowers who have met the longstanding requirements for loan forgiveness. This is big news, and it’s a direct challenge to Education Secretary Linda McMahon, with the AFT arguing that the department is delaying cancellation in a way that is “unwarranted and unlawful” and will have “real and significant consequences”.

The clock is ticking for many borrowers. With the American Rescue Plan, Congress temporarily stopped treating loan cancellation as taxable income until January 1, 2026. After that, a bunch of people are going to be expected to pay taxes on those canceled debts, and the Education Department’s delays are only making things worse. The AFT is trying to get an injunction to force the department to do a couple of important things.

According to NPR, they want the debts of borrowers on income-dependent repayment plans like IBR, ICR, and PAYE to be canceled when those borrowers have met the requirement of being in repayment for 20 or 25 years. Second, they want the department to process the thousands of outstanding requests for Public Service Loan Forgiveness from borrowers who want to “buy back” time that didn’t previously count.

Trump’s plan to delay loan forgiveness is being challenged

This whole mess, according to the Education Department, is the Biden administration and the federal courts’ fault. Education Secretary Linda McMahon even had a statement in July, saying, “Congress designed these [plans] to ensure that borrowers repay their loans, yet the Biden Administration tried to illegally force taxpayers to foot the bill”. She’s talking about the SAVE repayment plan, which was created by the Biden administration but was so generous with its terms that the courts put it on ice, and now the whole loan program is in total confusion.

The department has been using this legal uncertainty around the SAVE plan to justify why it’s stopping cancellation under ICR, PAYE, and IBR. In reality, the IBR plan was created by Congress and isn’t being legally challenged, but the department said that questions about SAVE’s legality have made it tough to figure out eligibility for IBR cancellation. This means a lot of borrowers who are probably eligible for cancellation are still stuck making payments.

The department did say that “For any borrower that makes a payment after they became eligible for forgiveness, the Department will refund overpayments when the discharges resume”. As for when that will be, they wouldn’t give a timeline, only saying, “IBR discharges will resume as soon as the Department is able to establish the correct payment count”.

It’s not just the IBR crowd that’s having issues. People in the Public Service Loan Forgiveness (PSLF) program are also seeing major delays. Court records show that by the end of last month, the department had a backlog of nearly 75,000 applications for cancellation under the PSLF “Buyback” program. This program lets borrowers with 10 years of verified public service make qualifying payments for the months they spent in forbearance or deferment.

The AFT’s lawsuit says that between May and August, the department got way more buyback applications than it processed. On average, the department got 9,902 new applications each month, but only processed an average of 3,604.