With a union lawsuit against the Trump administration on hold during the government shutdown, borrowers’ wait times for student loan forgiveness may get even longer.
The American Federation of Teachers’ legal challenge against Trump officials will be stayed until Congress restores appropriations to the U.S. Department of Justice, U.S. District Judge Reggie Walton said in an Oct. 4 filing. The government shuttered on Oct. 1 after Democrats and Republicans failed to agree on a spending deal.
In its lawsuit, the AFT accused the U.S. Department of Education of denying federal student loan borrowers their rights to an affordable repayment plan and to the debt forgiveness opportunities mandated in their loan terms.
The stay on the union’s legal challenge could further prolong the long wait times borrowers are already facing, consumer advocates say. What’s more, a law shielding student loan forgiveness from taxation expires at the end of 2025, meaning borrowers who get the relief after that point may be hit with a bill from the IRS.
“We are very concerned that, without judicial intervention, borrowers will not get their cancellation processed this tax year and could potentially incur thousands of dollars of tax liability,” said Persis Yu, deputy executive director and managing counsel at Protect Borrowers, which is serving as AFT’s counsel.
