AFT Initiates Class Action Against Trump Administration Over Student Loan Forgiveness Delays
The American Federation of Teachers (AFT), representing approximately 1.8 million members, has filed a class action complaint challenging the Trump administration’s handling of student loan forgiveness programs. The union alleges the U.S. Department of Education is withholding legally mandated benefits, including income-driven repayment (IDR) plans and Public Service Loan Forgiveness (PSLF), thereby harming borrowers.
Allegations of Denied Access to Debt Relief Programs
The complaint, an amendment to an earlier March filing, asserts that the Department of Education has systematically denied borrowers their rights to affordable repayment options and loan cancellation programs. IDR plans adjust monthly payments based on income and provide debt forgiveness after a set period, while PSLF offers debt cancellation for public servants and nonprofit employees after ten years of qualifying payments.
“The Department’s decision to withhold IDR and PSLF benefits is actively harming borrowers,” the AFT stated in its filing. The Department of Education did not respond to requests for comment.
Backlog and Processing Delays Undermine Relief Efforts
Data disclosed during ongoing litigation reveal a significant backlog affecting borrowers. As of mid-August court records, over 1 million applicants awaited IDR plan approvals, and nearly 73,000 were pending PSLF determinations. Education expert Mark Kantrowitz noted this backlog evidences the Department’s failure to meet statutory obligations.
Impact on Borrowers Highlighted in Complaint
The class action includes several plaintiffs burdened by delayed relief. One borrower, carrying $198,000 in federal student loans and repaying for over 25 years, has been eligible for IDR cancellation since May 2025 but remains unpaid. Another plaintiff with $756,000 in debt has awaited forgiveness since February without resolution.
By late July, more than 1.3 million IDR applications were pending, while processing capacity averaged roughly 87,823 applications monthly. The AFT warns that at this pace, borrowers may endure years of delay before receiving Congressional-mandated benefits.
Outlook
This legal action underscores ongoing challenges within the federal student loan system and highlights systemic administrative delays impacting millions of borrowers. The case will likely influence future policy and operational reforms regarding student debt relief.
FinOracleAI — Market View
The class action lawsuit filed by AFT draws attention to operational inefficiencies and regulatory risks within the federal student loan ecosystem. These delays in loan forgiveness programs may sustain borrower distress and dampen consumer spending in the near term. Investors should monitor potential policy responses and litigation outcomes, which could lead to increased government scrutiny and reforms in loan servicing.
Impact: negative
