Trump administration is illegally delaying student-debt forgiveness for tens of thousands of public servants, lawsuit alleges

By Jillian Berman

Teachers, nurses and other borrowers have waited years for approval to complete their payment obligation and access debt relief, the suit claims

The Education Department, lead by Linda McMahon, is stalling progress toward student-debt forgiveness for public servants, a lawsuit alleges.

The Trump administration is stalling access to student-debt relief for tens of thousands of public servants who are entitled to it, a class-action lawsuit filed in federal court Friday by the American Federation of Teachers and several student-loan borrowers alleges.

Borrowers in the Public Service Loan Forgiveness program, an initiative that allows people who have been working for the government and certain nonprofits for 10 years to have their federal student loans canceled, are struggling to get answers about when they'll qualify for promised debt relief, according to the suit.

In order to have their debt wiped out, people working in public-service jobs must make 120 monthly payments. The complaint alleges that according to the most recent data available, which is from April of this year, 88,000 borrowers who have applied to make several of their final payments in a lump sum were waiting for an answer from the Education Department about whether they'll be able to do so.

That limbo, which for some of the named plaintiffs has lasted more than a year, has prevented them from moving forward in other ways in their financial lives, attorneys for the borrowers say. If they give up on waiting for an answer from the government and instead move forward with making their final payments through the regular process, many of them could wind up paying thousands of dollars more on their loans than if the Education Department approved their application to make the lump-sum payments, the suit claims.

Some people in public-service jobs are also seeing months of payments that had previously been counted toward the 120 needed for forgiveness disappear from their student-loan accounts, the suit alleges. Overall, the complaint paints a picture of a system sowing confusion and unease for nurses, teachers and other borrowers, many of whom have been working in public-service jobs and paying their loans for years.

The wait for answers "makes it extremely difficult for people to make any kinds of financial plans for their future," said Laura Dismore, senior counsel at the advocacy group Protect Borrowers and one of the attorneys representing the borrowers. "People are putting off starting families, people are putting off changing jobs or changing careers. Borrowers talk about intense stress and anxiety around not knowing when in some cases a six-figure debt is going to be forgiven."

The issues these borrowers are allegedly facing come as the Trump administration is in the midst of overhauling the student-loan system. Officials are implementing new repayment plans, getting rid of old ones and reportedly preparing to restart debt collection on defaulted student loans. Meanwhile, the Education Department currently has about half the staff it had in previous years. With all of these changes, borrowers have complained that they have struggled to obtain basic information about their loans and to get paperwork processed in a timely fashion.

In addition to these logistical challenges, advocates have worried about the Trump administration's philosophical approach to PSLF. Earlier this year, several organizations sued the Education Department after it said it would cut off access to PSLF for people employed at organizations that work on issues, such as immigration and gender-related healthcare for minors, that are in the administration's ideological crosshairs. The Trump administration recently backed down from defending the policy in court.

"They seem determined not to help those to have dedicated their careers to public service, but to hurt them," AFT President Randi Weingarten said of the Trump administration in comments to reporters.

The Education Department didn't immediately respond to a request for comment on the lawsuit.

Waiting years for an answer to whether they'll get debt relief

Ever since borrowers could start claiming forgiveness under PSLF in 2017, the program has been plagued by challenges and confusion. The first year borrowers could apply for forgiveness under the program, 99% of those who applied were rejected, in large part because they didn't have the right type of federal student loan or weren't in the right repayment plan.

In the ensuing years, borrowers found themselves losing out on months of eligibility because they were put in forbearance - a payment pause - by their servicer, either because they made their payments too early or for other reasons.

Under the Biden administration, officials made changes aimed at cleaning up some of the sticking points for borrowers. One of those efforts, known as the buyback program, is a major focus of the lawsuit. In 2022, the Education Department launched an initiative that allowed borrowers who had spent months in forbearance but were still working for an employer that qualified them for PSLF to "buy back" those months. Previously, any months spent in forbearance didn't count toward the 120 needed for a borrower to have their debt canceled under the program.

To be eligible for the buyback program, the months spent in forbearance have to bring the borrower to the 120 needed to qualify for relief. For example, a borrower who spent five months in forbearance can apply for a buyback once they have made 115 payments.

To obtain the buyback, the borrower fills out a form and sends it to the Education Department. They need to be able to pay the full amount of the missed months within 90 days of the date on the buyback agreement.

The Education Department evaluates these applications, but the suit alleges that the department has essentially stalled on doing that. The last time the department released the numbers on how many buyback applications were still pending, in April, there were 88,000, according to the suit.

"We have borrowers who have been waiting two years at this point for their buyback applications to be processed," Dismore said. She added that they've learned recently that some newer applications have been processed, but there "doesn't appear to be any rhyme or reason to the order they are processing these applications."

Being stuck in this backlog has real consequences for borrowers, the suit claims.

One of the named plaintiffs, David Petley, works at a rural community hospital as a pharmacist and owes $338,000 on his loans, according to the suit. He has 11 years of employment that qualify for PSLF. He was placed in an involuntary forbearance that lost him eight months of progress toward PSLF, the suit claims. Petley filed two buyback applications in May 2025, according to the suit.

The suit alleges that he hasn't heard back from the Education Department on the status of his buyback applications except through the office of his member of Congress, who said the department confirmed it had received at least one buyback application, and that it was still pending.

"Despite a congressional inquiry on my behalf, the Department of Education has not told me where my application stands in the queue and nor have they provided me with an estimated timeline," Petley told reporters. "We are ready to settle up, but we have no clear answer about when that might happen."

If Petley decides to pay the last eight months of his loan instead of waiting for an answer on his buyback application, he'll have to pay $23,500 for those months, instead of the less than $15,000 he would pay through the buyback program, according to the suit. In some cases like his, the amount borrowers would have to pay now is higher than what they would pay under the buyback program because cheaper repayment plans that existed when they were in forbearance have disappeared, or because they are paying on plans tied to their income, which has gone up in the ensuing years.

Petley said that he took a pay cut when he decided to work at a nonprofit hospital in rural Oregon, but the promise of eventual debt relief made the move financially manageable.

"Public-service loan forgiveness helped draw me to work at a rural hospital," he said. "That's evidence of this program working. But for professionals considering the same path, the promise has to be dependable."

Progress toward debt forgiveness is clawed back

The suit highlights other challenges with the PSLF program that are plaguing borrowers. According to the complaint, borrowers are seeing months of payments that their accounts once showed counted toward PSLF disappear.

Elizabeth Schoepflin is one of those borrowers, the suit alleges. She has worked as a speech pathologist in a New York school for roughly 16 years. The suit claims that earlier this year, she had made 119 qualifying payments and was on track to make her 120th payment in April. That month, she made her 120th payment and submitted the final form certifying that her employment qualifies for PSLF, the suit says.

She waited months to see her loan balance disappear, but she wasn't alarmed, because she had experienced delays with the Education Department and its servicers' handling of PSLF paperwork before, the suit claims. Then in August, she received notice from the department that she was losing credit for the payments she made from February 2025 to April 2026, even though she was working at the same job and made payments on the same plan during that period as she had in previous years when her payments counted, according to the suit.

Now the department says she needs 15 more payments to get her $43,000 in student debt canceled, but it has provided no explanation for the change, the lawsuit alleges.

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10-30-26 1220ET