Student-loan borrowers in public service are trapped with debt that 'should be forgiven,' a new lawsuit says

• The Education Department is facing a new lawsuit over the Public Service Loan Forgiveness program.
• The lawsuit said the department is failing to process buyback applications and is illegally rescinding borrowers’ payments.
• These delays are forcing borrowers to pay off loans that should be forgiven, the lawsuit said.

On Friday, the American Federation of Teachers President Randi Weingarten filed a lawsuit against the Department of Education over stalled debt relief for borrowers pursuing Public Service Loan Forgiveness, which forgives student debt for government and nonprofit workers after 10 years.

The lawsuit, which is seeking class-action status, said that the department has failed to process the buyback applications of 90,000 borrowers, which allows borrowers to “buy back” months spent in deferment or forbearance if those months would put them at the threshold for relief.

The lawsuit also said the department has illegally rescinded payments borrowers have made toward the program, “trapping in debt borrowers whose loans should be forgiven.” It includes Donald Knierim, who previously spoke to Business Insider, as a declarant in the case. Knierim retired after being notified that he had achieved PSLF, only to have 15 of his payments rescinded months later.

Advocacy group Protect Borrowers is representing the AFT. Its senior counsel, Laura Dismore, said in a statement that PSLF borrowers “deserve better than more dysfunction and broken promises.”

“The law guarantees public service workers certain rights, and we will enforce those rights wherever and whenever they are violated,” Dismore said.

The Department of Education did not immediately respond to a request for comment from Business Insider.

Ongoing Public Service Loan Forgiveness challenges

Business Insider has heard from public service workers over the past who have faced a slew of challenges with PSLF. For example, the PSLF payment tracker has not updated for many borrowers, leaving those who made their final payments waiting for their relief to be processed.

The continued backlog of buyback processing has been an added strain; the department’s most recent status report in a separate lawsuit filed by the AFT said that 88,000 applications were pending. The department said some borrowers submitted multiple buyback requests, which inflated the backlog.

More recently, PSLF borrowers like Knierim received notices that the payments they had made toward forgiveness no longer count, extending some borrowers’ repayment timelines by years. The department said the clawbacks were due to Biden-era coding errors.

All of the listed delays to relief are actively harming borrowers in public service, the lawsuit said. For example, Elizabeth Schoepflin, one of the plaintiffs, said that the Education Department “ripped away the loan forgiveness credit I earned without any explanation.”

“Every month this drags on is another payment I shouldn’t have to make,” she said.

David Petley, another plaintiff, said he’s been waiting over a year and a half for his buyback application to be approved.

“I am expected to keep making more expensive monthly payments in the meantime,” he said.

These challenges come as the Trump administration is implementing its student-loan repayment overhaul, which includes new repayment plans and borrowing caps. While borrowers have reported surging monthly bills under the plan, the administration has said its changes are intended to simplify a complex repayment system and curb excessive borrowing.

Have a story to share about student loans? Contact this reporter at asheffey@businessinsider.com.

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