Key Points
- A lawsuit filed by the American Federation of Teachers (AFT) alleges that the Department of Education unlawfully blocked access to several income-driven repayment (IDR) plans, leaving borrowers without legally mandated payment options.
- The lawsuit claims that this decision violates federal law, disrupts Public Service Loan Forgiveness (PSLF) progress, and could push borrowers into financial hardship.
- The case could determine whether millions of borrowers regain access to lower monthly payments and PSLF credit.
The American Federation of Teachers (AFT), representing 1.8 million educators and public service workers, has sued the U.S. Department of Education for what it calls an unlawful and harmful decision to block access to legally authorized income-driven repayment (IDR) plans, such as Income-Based Repayment.
The lawsuit, filed in federal court in Washington, D.C. yesterday, argues that the Department removed access to these repayment options without justification, effectively forcing borrowers into unaffordable payments or forbearance.
For weeks, borrowers have reported confusion and rising payments due to the Education Department’s decision to halt processing of IDR applications, including those for the Income-Based Repayment (IBR) and Income-Contingent Repayment (ICR) plans. The lawsuit contends that this move violates federal law, as Congress has explicitly mandated the availability of these repayment options to ensure student loan borrowers have a way to manage their debt based on income.
Related: Trump Moves To Dismantle The Department of Education
What The Lawsuit Challenges
At the center of the legal challenge is the claim that the Department of Education is violating statutory requirements under the Higher Education Act. Congress has mandated that IDR plans remain available to federal student loan borrowers, yet the Department has effectively shut them down by removing applications and instructing loan servicers not to process them.
Mike Pierce, Executive Director of the Student Borrower Protection Center, noted in a statement that “Borrowers have a legal right to payments they can afford and today we are demanding that these rights are enforced by a federal judge.”
The lawsuit further argues that the Department’s decision disproportionately harms public service workers pursuing PSLF. Borrowers in IDR plans can have their loans forgiven after 120 qualifying payments, but without access to these plans, many cannot continue making eligible payments, delaying or entirely preventing their loan forgiveness.
This follows a series of legal and administrative challenges to student loan policies, including the recent 8th Circuit Court ruling that blocked the SAVE repayment plan. However, the AFT lawsuit emphasizes that the Department’s actions go beyond the court ruling.
While the decision affected the SAVE plan, it did not explicitly prohibit the Department from continuing other IDR options such as IBR and ICR. The AFT argues that shutting down these plans was an unnecessary and damaging overreach.
Related: Public Service Loan Forgiveness Still Available During Processing Pause
What Happens Next
The outcome of this case could have significant consequences for millions of student loan borrowers. If the court rules in favor of the AFT, the Department of Education may be forced to reinstate IDR plans immediately, allowing borrowers to once again apply for affordable repayment options. This would also enable PSLF participants to resume progress toward loan forgiveness.
If the lawsuit does not succeed, borrowers could remain in financial limbo, unable to access IDR plans and facing higher payments. In the meantime, the Department has offered little guidance on when, or if, these repayment options will be restored.
The court may also grant an emergency injunction, and the Department could be compelled to immediately restore IDR access while the case is pending. Without such an order, borrowers could see months of continued disruption.
What Borrowers Can Do Now
For those affected by the shutdown of IDR plan applications, there are still some steps to take:
- Check Loan Status: Borrowers should log into their loan servicer accounts to confirm their current repayment plan and ensure they are not mistakenly placed in forbearance or see their payment increase.
- Cancel Auto Payment: Borrowers needing to recertify their income for an IDR plan may want to cancel their automatic payments in the short term to ensure that they're not billed a higher payment amount they can't afford.
- Request Forbearance If Needed: If a borrower cannot afford their new payment, they can request an administrative forbearance. However, this may not count toward PSLF or IDR forgiveness.
- Monitor Lawsuit Developments: If the lawsuit succeeds, IDR applications may reopen quickly. Borrowers should stay informed and be prepared to submit applications once the system is restored.
The coming weeks will be crucial in determining whether student loan borrowers regain access to affordable repayment options or continue facing rising costs. With millions caught in limbo, the outcome of this lawsuit could shape the future of student loan repayment policies nationwide.
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Editor: Colin Graves
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.