Teacher union sues feds for delaying loan forgiveness

“This unwarranted and unlawful withholding of borrowers’ rights has real and significant consequences if not immediately rectified,” the lawsuit claimed. 

Through this injunction, the AFT wants to force the Education Department to cancel the debt of borrowers on repayment plans like Income-Based Repayment plan and the Income-Contingent Repayment plan, among other plans, when they have met the requirements for loan forgiveness. 

The Department of Education confirmed in its updated guidance earlier in July that student loan forgiveness, like the Saving on a Valuable Education plan and other loan forgiveness plans, has been blocked. 

AFT filed a motion for a temporary restraining order, and the Department of Education restored access to the applications for income-driven repayment plans. 

“The defendants have unlawfully put a pause on all loan cancellation programs through the IDR plans, thus depriving borrowers who have made all the required repayment of their rights to have their loans cancelled,” the lawsuit said.

Even though the applications were restored, AFT claimed the system was backlogged and that there were over a million pending IDR applications. The suit claimed that from May to August, "the Department received an average of 9,902 new applications, but only processed an average of 3,604."

The department is currently working through the applications while ensuring that borrowers have submitted the required documents, Education Department Deputy Press Secretary Ellen Keast told NPR.

On Jan. 1, 2026, loan cancellation under the IDR plan will be taxable income for borrowers and will be expected to pay taxes on those canceled debts.

“Borrowers who are entitled to forgiveness now continue to have to put their lives on hold while they wait indefinitely for their loans to be forgiven,” the lawsuit said.

The Education Department largely blames these delays in debt cancellation on the Biden administration and federal courts.

"Congress designed these [plans] to ensure that borrowers repay their loans, yet the Biden Administration tried to illegally force taxpayers to foot the bill," Education Secretary Linda McMahon said in a July statement.

The Center Square reached out to AFT and the Department of Education for a comment, but has not received a response.