Borrowers Accuse ED of Mismanaging PSLF

A class action lawsuit was filed Friday on behalf of more than 90,000 public servants who argue the Trump administration has prevented them from securing millions they are owed in debt relief through the Public Service Loan Forgiveness program. 

The nationwide suit, filed in the D.C. federal district court by the American Federation of Teachers, claims that the Education Department has been “grossly” mismanaging the loan-forgiveness program, which was signed into law in 2007 under Republican President George W. Bush. Specifically, the teachers’ union says the Trump administration has bungled a feature of the PSLF program known as buyback. 

To qualify for loan forgiveness under the program, borrowers must make 120 monthly payments. But sometimes a borrower’s loan goes into deferment or forbearance, preventing them from making a payment. Buyback allows borrowers to retroactively make payments for those months and have them count toward forgiveness.

This feature, introduced under the Biden administration, was adopted to help people “hurt by the first Trump administration’s mismanagement of student debt,” AFT says in a news release about the suit. But now, the second Trump administration is choosing not to acknowledge borrowers’ buybacks, the union alleged.

That decision, AFT says, has left eligible borrowers who have completed the program and applied for relief “stuck in limbo, with no updates for months on end.”

“Secretary McMahon has flagrantly ignored her responsibility to help teachers, nurses and first responders under the buyback provision her department is required to honor,” said the lead plaintiff, AFT President Randi Weingarten, in the release. “This lawsuit demands that McMahon stop stalling and do her job—to help, rather than hurt, the people she is sworn to serve.”

Education Department officials have told Politico and other news outlets that the delay in recognition of some buybacks and the rescission of others was due to “coding errors” made during the Biden administration. Those errors “resulted in inaccurate payment counts for some borrowers. Like other missteps caused by the previous Administration, FSA has resolved the issue and already notified the vast majority of affected borrowers of updates to their payment counts,” ED told Politico in a statement.

AFT argues that the department has not properly explained the nature, timing, cause or effect of the so-called coding errors and that the clawing back of borrowers’ qualified payments is harmful and illegal.  

A nonprofit consumer protection group sued over similar debt-forgiveness claims last week, but they focused on Trump’s refusal to discharge loans for borrowers whose colleges closed under “exceptional circumstances.”