In 2025, federal student loan borrowers have been at the center of critical legal battles challenging the U.S. Department of Education’s handling of repayment plans, loan forgiveness programs, and borrower protections. Several lawsuits have emerged alleging illegal actions that restrict access to affordable repayment options and hinder progress toward loan forgiveness, sparking significant controversy and legal intervention.
Background of the Student Loan Payments Lawsuit
One of the most notable lawsuits was filed by the American Federation of Teachers (AFT), a 1.8 million-member union representing educators and public service workers. The AFT sued the Department of Education (ED) in March 2025, accusing it of effectively breaking the federal student loan system by denying borrowers access to critical repayment options, including Income-Driven Repayment (IDR) plans and the Public Service Loan Forgiveness (PSLF) program.
The lawsuit was triggered by the Education Department’s removal of the application for IDR plans from its website and secret directives ordering loan servicers to halt processing applications, actions which prevented millions of borrowers from enrolling in affordable repayment plans.
Key Allegations and Legal Claims
- Denial of Affordable Repayment Plans: Borrowers were blocked from accessing IDR plans that cap monthly payments based on income, making repayment manageable.
- Obstruction of Loan Forgiveness: The lawsuit highlights how these actions impede progress toward the PSLF program, which forgives remaining balances for eligible public service workers after a set number of payments.
- Violation of Federal Law: The complaint argues that the Department’s conduct violates statutory obligations under the Higher Education Act, ignoring Congress’s intent to provide borrower protections.
- Lack of Transparency and Communication: Borrowers allege the Department failed to notify them adequately about changes and legal rights, resulting in confusion and financial hardship.
Litigation Developments and Court Injunctions
Federal courts have issued injunctions blocking implementation of the Biden Administration’s revised IDR program called the Saving on a Valuable Education (SAVE) Plan. They ruled that certain provisions, including zero percent interest rates and “litigation forbearance,” exceeded the Department’s legal authority.
As a result, collections on impacted loans resumed in August 2025, and borrowers were instructed to transition back to legally compliant repayment plans. The Department also committed to outreach efforts to guide affected borrowers toward sustainable payment options.
Consumer Protection Agency Actions
Beyond government lawsuits, the Federal Trade Commission (FTC) has taken action against fraudulent debt relief companies targeting student loan borrowers, recovering millions through enforcement against scam operators charging illegal upfront fees for services borrowers can obtain for free.
The FTC continues to provide refunds to scammed borrowers and encourages vigilance against fraudulent schemes.
Impact on Borrowers and the Student Loan Landscape
Millions of borrowers remain affected by these legal and administrative upheavals, facing uncertainty about repayment schedules, interest accrual, loan forgiveness eligibility, and the cumulative financial consequences.
Experts recommend borrowers stay informed, keep detailed records, and consult qualified student loan advisors to navigate the evolving repayment landscape.
Conclusion
The student loan payments lawsuit and associated legal challenges in 2025 reveal the ongoing tension between administrative actions, borrowers’ rights, and legislative mandates. These cases underscore the critical need for transparent, legally compliant policies that ensure affordable repayment pathways and protect public service workers and millions of Americans carrying student debt.
Continued legal oversight and advocacy remain essential to uphold borrower protections and facilitate equitable resolution of federal student loans.
