Borrowers Stuck in Months-Long Limbo Continue to Accrue Interest and Denied Credit Toward Loan Cancellation While Administration Guts Agency That Could Help
May 16, 2025 | WASHINGTON, D.C. — For the first time since the AFT sued the U.S. Department of Education (ED) for issuing a stop-work order to cease accepting and processing applications for Income-Driven Repayment (IDR) plans, ED yesterday publicly revealed the number of borrowers affected by the chaos in the IDR system. That suit sought to restore access to IDR plans after the agency took the program offline in February.
According to the report, there are 1,985,726 pending applications seeking to lower their monthly student loan payments as of April 30, 2025. During the month of April, ED only approved or denied 79,349 applications. At this rate, it will take ED over two years to process the existing backlog of applications. The report also included new information about how ED is operating its new Public Service Loan Forgiveness (PSLF) Buyback option.
The AFT is represented by the Student Borrower Protection Center (SBPC) and Berger Montague.
A copy of the report filed with the court is available here: https://storage.courtlistener.com/recap/gov.uscourts.dcd.278527/gov.uscourts.dcd.278527.36.0.pdf
A copy of AFT’s complaint against ED is available here: https://protectborrowers.org/aft-v-u-s-department-of-education-lawsuit-complaint/
“It is outrageous and unacceptable that at a time when the Department of Education is being gutted, with its main energy and focus on acting as a debt collection agency, millions of borrowers are being denied their legal right to an affordable repayment option,” said AFT President Randi Weingarten. “It is all the more concerning that until their applications are processed, these borrowers are being denied credit toward debt cancellation under the PSLF program. Even if borrowers can eventually buy back this time, that adds another cumbersome step to a process that is already notoriously bureaucratic. This is the opposite of government efficiency. The AFT brought this lawsuit to stand up for its members’ legal rights. We will continue to fight to ensure that these rights are not impeded by tedious bureaucracy and poor program administration.”
“This filing confirms what borrowers have known for months: their applications for loan relief have effectively been going into a void,” said SBPC Legal Director Winston Berkman-Breen. “The AFT’s lawsuit brings much-needed transparency to how ED is running the IDR and PSLF programs. Although these numbers clearly reflect a system that is not working for borrowers, public service workers finally have clarity about whether and how the PSLF Buyback option will help them achieve the debt cancellation that Congress promised when it created the PSLF program.”
Yesterday’s report also included, for the first time, a definitive list of forbearance types that are eligible for the PSLF Buyback option, as well as the number of pending Buyback applications. Pursuant to revised PSLF rules finalized in 2022, through the Buyback option, public service workers can make payments for past months during which their loans were in a PSLF-ineligible payment plan in order to have that time count toward their debt forgiveness progress.
The Buyback option is particularly important because approximately 8 million borrowers enrolled in the Saving on A Valuable Education (SAVE) IDR plan have been in a special litigation forbearance since a federal court in Missouri enjoined part of the plan in the summer of 2024. Borrowers have received mixed messages from their student loan servicers and ED’s staff as to whether this time in forbearance was eligible for the Buyback option, and due to the Trump administration’s stop-work order, these borrowers have been unable to switch to a PSLF-eligible plan.
Other borrowers who did file applications to change plans have waited for months in forbearance for their applications to be reviewed, and have similarly received inconsistent information as to whether this time will count toward PSLF and, if not, whether it is eligible for the Buyback option.
Yesterday’s reporting confirms that borrowers whose loans were forced into the SAVE plan litigation forbearance can reclaim that time through the PSLF Buyback option. The report also stated that there is a backlog of 49,318 PSLF Buyback applications, with only 1,472 processed during the month of April. Since the Buyback is only available to borrowers for whom the recouped months will result in satisfying the PSLF requirements, this indicates that as many as 49,318 borrowers whose loans should be cancelled under federal law are instead being held in limbo.
Pursuant to the court’s April 28 order, ED’s next report is due on June 15. The report will include the number of outstanding IDR applications and PSLF Buyback applications pending at that time, as well as the number of applications for each program that ED processed during the month of May.
Background
Federal law requires the U.S. Department of Education (ED) to provide eligible borrowers with monthly payment options tied to their income, rather than to their overall debt. For low- and moderate-income borrowers seeking to repay their loans, Income-Driven Repayment (IDR) payments are their only option. Public service workers also rely on access to IDR as a qualifying payment for the Public Service Loan Forgiveness (PSLF) program. Without the ability to enroll in an IDR plan, public service workers are left with unaffordable monthly payments or payments that do not count toward PSLF.
In August 2023, President Biden launched a new IDR plan, promulgated under the same statutory authority that each prior administration had used when creating new plans. The Saving on A Valuable Education (SAVE) plan would have been the most affordable IDR plan, cutting payments in half for most borrowers. In March 2024, however, a coalition of 18 conservative state attorneys general sued to block the plan. Aspects of the SAVE plan were preliminarily enjoined, resulting in appeals. On February 18, 2025, the federal Eighth Circuit Court of Appeals preliminarily enjoined the SAVE plan in its entirety and returned the case to the district court for further proceedings. Although the injunction is still in force, there have been no decisions on the merits of whether the SAVE complies with the IDR statutes.
In response to the Eighth Circuit’s order, ED removed access to the online IDR application for all plans and instructed its contractors to cease processing all pending applications. Although it stated this was a necessary response to a court order, the government’s action plunged millions of borrowers whose loans were not affected by the court order into limbo.
For weeks, no borrower could apply to or change their IDR plan until the AFT filed its lawsuit on March 18 and sought an emergency injunction compelling ED to restore access to IDR. Under pressure, ED announced that it would restore access to the IDR application. The online application was restored on March 26; however, in a subsequent filing, ED stated that it would not begin processing applications until at least May 10.
On April 26, ED agreed to submit monthly reports to the court on the status of the IDR and Buyback application process.
Further Reading
Washington Post coverage of ED’s stop-work order: It could be months before affordable student loan repayment plans return
SBPC press release on AFT lawsuit: AFT v. ED Update: Under Pressure, ED Will Restore IDR Application Tomorrow But Will Not Immediately Resume IDR Paperwork Processing
SBPC statement on ED taking down IDR application: Trump Administration Denies Access to Affordable Repayment Plans in Extreme Response to Right-Wing Court Order
SBPC blog on lawsuits challenging new IDR plan: The Biden Administration’s Latest Effort to SAVE Borrowers and the States that are Hell-Bent to Stop It
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About the AFT
The AFT represents 1.8 million pre-K through 12th-grade teachers; paraprofessionals and other school-related personnel; higher education faculty and professional staff; federal, state and local government employees; nurses and healthcare workers; and early childhood educators.
Learn more at aft.org or follow AFT on Twitter @AFTunion.
About Student Borrower Protection Center
Student Borrower Protection Center (SBPC) is a nonprofit organization focused on eliminating the burden of student debt for millions of Americans. We engage in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance racial and economic justice.
Learn more at protectborrowers.org or follow SBPC on Twitter @theSBPC.
About Berger Montague
Berger Montague is the nation’s preeminent law firm representing plaintiffs in complex civil litigation. For over half a century, Berger Montague has played lead roles in precedent-setting cases and has recovered over $50 billion for its clients and the classes they have represented. The firm’s award-winning attorneys include leaders in the fields of antitrust, commercial litigation, consumer protection, defective products, environmental law, employment law, securities, and whistleblower cases, among many other practice areas. Berger Montague is headquartered in Philadelphia and has offices in Chicago, Minneapolis, San Diego, San Francisco, Toronto, Washington, D.C., and Wilmington.