Education Department Faces Pressure to Resolve Loan Forgiveness Delays
The ongoing delays in processing student loan forgiveness are drawing criticism from educators and borrowers alike. In a recent court filing, the American Federation of Teachers (AFT) has called for judicial intervention to compel the U.S. Department of Education to expedite the cancellation of debts for eligible borrowers.
According to the AFT, many borrowers who qualify for loan forgiveness have been left waiting due to “unwarranted and unlawful” delays by the department. These delays could have significant repercussions as the temporary relief from treating loan cancellation as taxable income, provided by the American Rescue Plan, is set to expire on January 1, 2026.
The union is seeking an injunction that would require the department to cancel debts for borrowers under income-driven repayment plans, such as IBR, ICR, and PAYE, once they’ve met the 20 or 25-year repayment threshold. Additionally, it calls for action on thousands of pending Public Service Loan Forgiveness (PSLF) requests.
The SAVE Plan and Its Impact
Delays in debt cancellation have been attributed in part to the Biden administration’s income-driven SAVE repayment plan. This plan, which offered generous terms, faced legal challenges that resulted in its suspension, adding to the department’s difficulties in processing cancellations.
Education Secretary Linda McMahon has criticized the Biden administration, stating: “Congress designed these [plans] to ensure that borrowers repay their loans, yet the Biden Administration tried to illegally force taxpayers to foot the bill.” The legal uncertainties surrounding the SAVE plan have also affected the processing of IBR cancellations.
The department has assured borrowers that any overpayments made after eligibility for forgiveness will be refunded once discharges resume, though it has not provided a specific timeline.
Challenges with PSLF Applications
Borrowers seeking relief through the PSLF “Buyback” program have also faced hurdles. As of the end of last month, nearly 75,000 applications were backlogged, stemming from the department’s inability to process the influx of requests efficiently. This program allows borrowers to count periods of forbearance or deferment as qualifying payments.
Ellen Keast, Deputy Press Secretary of the Education Department, noted that the backlog is being addressed, albeit slowly, with a focus on ensuring eligibility through verified public service.
The Trump administration’s decision to significantly reduce staff at the Office of Federal Student Aid has been cited as a factor contributing to these delays.
Potential Default Risks
As interest accrual resumes under the Trump administration, more than 7 million borrowers enrolled in SAVE risk sliding into default. Efforts to enroll borrowers in alternative repayment plans have been sluggish, with over a million applications pending by the end of August.
Ellen Keast has attributed part of this backlog to the previous administration and stated that the department is working to resolve these issues in the coming months.
Research economist Daniel Mangrum from the Federal Reserve Bank of New York highlighted the gravity of the situation, noting that “one in three federal student loan borrowers that are in repayment right now are in some stage of delinquency,” signaling a looming risk of default for millions.
