Student Loan Forgiveness Failures Harm Borrowers, Lawsuit Claims

Case Overview: A class action lawsuit alleges the U.S. Department of Education unlawfully delayed and denied student loan relief, leaving millions of borrowers paying debts that should have been forgiven.

Consumers Affected: Teachers and borrowers who were denied access to income-driven repayment (IDR) plans and Public Service Loan Forgiveness (PSLF).

Court: U.S. District Court for the District of Columbia

The U.S. Department of Education has unlawfully delayed and denied student loan relief, leaving millions of borrowers paying debts that should already be wiped away, a new lawsuit alleges.

The proposed class action, brought by teachers and long-time borrowers, accuses the government of breaking federal law by blocking access to income-driven repayment (IDR) plans and withholding Public Service Loan Forgiveness (PSLF).

Borrowers Allege Delays Keep Them in Debt

The plaintiffs argue that the Department’s refusal to process cancellations has kept borrowers chained to debts for decades. Teachers, healthcare workers, and other public employees say they have followed the rules, made hundreds of payments, and still see no relief.

The American Federation of Teachers (AFT), representing 1.8 million members, says thousands of its members are eligible for cancellation but remain stuck making monthly payments. 

The union reports diverting tens of thousands of dollars and countless hours to help members navigate a shifting loan system instead of focusing on bargaining or classroom needs.

Individual borrowers describe staggering financial strain. One teacher paid on nearly $200,000 in debt for 25 years and hit the 300-payment mark, only to keep sending in over $700 a month while fearing a huge tax bill. 

A retiree who borrowed around $110,000 saw his debt balloon to more than $750,000 and continues paying despite meeting forgiveness criteria. Others say missteps by loan servicers or forced forbearance froze their progress just shy of cancellation, wiping out years of effort.

The System at the Center of the Legal Fight

Congress designed IDR and PSLF to keep higher education within reach and reward public service workers by forgiving balances after long-term repayment. But the lawsuit says the Department has failed to carry out that mandate. 

Instead, borrowers face blocked applications, missing progress trackers, and stalled cancellations, even though federal law requires discharge once conditions are met.

The issue comes amid political battles over student debt relief, including litigation targeting the Department’s SAVE Plan, which was meant to simplify repayment. Critics argue the current administration has gone further by halting access to plans that remain legal and required.

Government Faces Other Legal Battles in Loan Industry

This is not the first time borrowers have turned to the courts. The AFT already sued the government earlier this year for similar failures. 

The Justice Department recently filed a separate case challenging a Rhode Island loan-forgiveness program it claims unlawfully discriminated in hiring practices. And loan servicer Nelnet faces a class action accusing it of systematically miscalculating IDR payments, allegedly leaving borrowers overcharged and their credit damaged.

This most recent lawsuit seeks to represent multiple classes of borrowers, from those waiting on IDR applications to public service workers entitled to PSLF forgiveness. 

Plaintiffs are asking the court to order the Department to restore repayment options, process cancellations on time, and stop collecting payments and interest from borrowers who legally qualify for relief.

Case Details

• Lawsuit: American Federation of Teachers, et al. v. U.S. Department of Education, et al.
• Case Number: 1:25-cv-00802-RBW 
• Court: U.S. District Court for the District of Columbia

Plaintiffs' Attorneys: 

• Julie Selesnick, F. Paul Bland, E. Michelle Drake, and John G. Albanese (Berger Montague PC)
• Persis Yu, R. T. Winston Berkman-Breen, and Khandice Lofton (Student Borrower Protection Center)

Have you been impacted by the government’s actions on student loan debt programs? Let us know your experience in the comments section below!