The American Federation of Teachers (AFT) has filed an amended complaint against the U.S. Department of Education and Secretary Linda McMahon, seeking class action status on behalf of millions of borrowers. The lawsuit alleges that the Department is unlawfully delaying or denying student loan forgiveness under income-driven repayment (IDR) and Public Service Loan Forgiveness (PSLF).
On paper, this is a fight about administrative backlogs and program freezes. In reality, it exposes how the U.S. higher education system continues to operate as a debt trap, where promises of relief are routinely broken, and working families are forced to subsidize a predatory credential economy.
Debt as a Business Model
The Department of Education froze IDR processing for months, building a backlog that once stood at more than two million borrowers. Even after “restarting” the system, more than a million remain stuck. PSLF’s “Buyback” program alone is stalled with 74,000 unresolved cases.
These are not small bureaucratic hiccups—they are structural features of a system designed to delay cancellation for as long as possible. Borrowers who have made 20, 25, or even 30 years of payments are told to keep paying while they wait for forgiveness that may never come. Refunds are promised but often months away. Meanwhile, loan servicers continue to collect billions in revenue from a population already ground down by decades of repayment.
This isn’t simply mismanagement. It’s debt peonage, engineered by policymakers who present repayment as a civic duty while ensuring that the cycle of indebtedness continues.
The Human Cost
The lawsuit documents borrowers choosing between student loan payments and medical care, postponing life decisions like marriage or homeownership, and even contemplating bankruptcy. Beyond the financial harm, there is profound psychological damage—stress, sleeplessness, and a deepening sense of betrayal by a government that promised relief in exchange for decades of faithful repayment.
The looming “tax bomb” magnifies the crisis. Unless forgiveness is processed before January 1, 2026, discharged balances under IDR will once again be taxable income. That means borrowers who finally achieve cancellation could be hit with crushing IRS bills. Congress has already acted to expand eligibility under the “One Big Beautiful Bill Act,” but the Department continues to deny applications based on rules that no longer exist.
Historical Parallels: A Long Tradition of Debt Betrayal
The student debt crisis is only the latest in a series of American debt struggles where relief was promised but strategically withheld:
-
Farm Debt in the 1980s: Family farmers were told federal programs would help restructure loans. Instead, banks and agencies delayed, forcing foreclosures that devastated rural America.
-
The GI Bill’s Unequal Promise: While the GI Bill created new opportunities, Black veterans were systematically denied benefits through local gatekeeping. Access existed in theory but was obstructed in practice.
-
The Mortgage Crisis of 2008: Homeowners seeking modifications found banks losing paperwork, delaying applications, and profiting from continued payments—an eerie echo of today’s student loan servicing delays.
Each moment reflects the same pattern: debt relief as rhetoric, obstruction as reality.
A System Rigged to Fail Workers
The AFT’s legal filing is narrowly focused on the Administrative Procedure Act, accusing the Department of unlawfully withholding benefits and acting arbitrarily. But the larger structural truth is clear: the U.S. economy relies on debt as a mode of governance.
Student debt now exceeds $1.6 trillion. Universities raise tuition, Wall Street profits from securitized loans, and loan servicers pocket fees from keeping borrowers in repayment limbo. Meanwhile, adjunct professors earn poverty wages, and graduates face underemployment that makes repayment impossible. Higher education is no longer a ladder to the middle class—it is a system of extraction.
Looking Ahead: 2027 and Beyond
Even if courts intervene before the 2026 tax deadline, borrowers face another looming threat: the 2027 austerity cuts, including deep reductions in Medicaid.
For working families, this collision will be devastating. Many borrowers already choose between student loan payments and medical care. When Medicaid cuts hit, tens of millions will lose access to basic health coverage. The financial vise will tighten: loan payments on one side, healthcare costs on the other. The most vulnerable—low-income borrowers, caregivers, the disabled—will be left with no safety net.
In this light, the Department’s refusal to process loan forgiveness is not just bureaucratic delay. It is part of a broader austerity regime that disciplines workers through debt, strips away public benefits, and reinforces a permanent underclass of the indebted.
What’s at Stake
The AFT is asking the courts to compel the Department to process long-overdue discharges. Hearings are expected this fall, with a ruling possible before year’s end. But even if the courts side with borrowers, the deeper crisis remains: a political economy that treats debt not as a temporary burden but as a permanent condition of American life.
For borrowers, this case is about more than loan forgiveness. It is about whether the U.S. will continue its long tradition of promising relief while delivering betrayal—or whether working families will finally break the cycle of debt dependency before the coming wave of austerity in 2027 makes it even harder to escape.
Sources
-
American Federation of Teachers, Amended Complaint Against Department of Education (2025)
-
U.S. Department of Education, IDR and PSLF Program Guidance
-
The College Investor, “Education Dept. Accused of Blocking Student Loan Forgiveness” (2025)
-
Michael Hudson, Killing the Host (2015)
-
Maurizio Lazzarato, The Making of the Indebted Man (2012)
-
Elizabeth Warren, The Two-Income Trap (2003)
-
Bruce J. Schulman, The Seventies (2001)
No comments:
Post a Comment