The Trump administration filed papers on Thursday seeking to pause a potential class action lawsuit over allegedly blocked student loan forgiveness. Justice Department lawyers said this week’s government shutdown makes it necessary to halt the legal proceedings for now, and to extend relevant deadlines.
“At the end of the day on September 30, 2025, the appropriations act that had been funding the Department of Justice expired and those appropriations to the Department lapsed,” said administration attorneys in its filing. "The same is true for the majority of other Executive agencies, including the federal Defendants. The Department does not know when such funding will be restored by Congress. Absent an appropriation, Department of Justice attorneys and employees of the federal Defendants are prohibited from working, even on a voluntary basis, except in very limited circumstances, including ‘emergencies involving the safety of human life or the protection of property.’
The Trump administration has filed similar requests in other legal challenges in federal courts across the country as the ongoing government shutdown continues. So far, there are no significant signs that Republican and Democratic lawmakers are close to an agreement to reopen the government. Here’s what this means for student loan borrowers who could be covered by the class action lawsuit.
Teachers Union Seeks Class Certification And Emergency Relief For Student Loan Borrowers
Last month, the American Federation of Teachers amended its existing lawsuit that it had filed earlier this year over delays and backlogs associated with income-driven repayment plans, or IDR. IDR plans offer borrowers affordable monthly payments tied to their income, with the possibility of student loan forgiveness after 20 or 25 years in repayment. Enrolling in IDR plans is usually also necessary for borrowers pursuing Public Service Loan Forgiveness, or PSLF. PSLF offers debt relief in as little as 10 years for borrowers who work full-time in qualifying nonprofit or government jobs.
In its amended complaint, the AFT expanded its legal claims to include an assortment of other alleged problems plaguing federal repayment and loan forgiveness programs. In addition to citing ongoing backlogs involving IDR applications and requests for PSLF Buyback (a program that allows borrowers to make a retroactive payment to allow certain prior forbearance or deferment periods to count toward loan forgiveness), the union also argued that the Department of Education is illegally blocking student loan forgiveness under the IBR, ICR, and PAYE plans, and has not immediately implemented new rules to expand enrollment in the IBR plan.
Later in September, the AFT filed a request to certify the lawsuit as a class action. If approved, all similarly situated borrowers could be covered by the suit without needing to directly participate or opt in. The union also filed a request for a preliminary injunction, an emergency motion asking the court to issue an immediate order to the Department of Education, even before a final ruling is issued on the merits of the case. The AFT noted that the clock is ticking for many borrowers who would otherwise qualify for student loan forgiveness, as the tax code changes on January 1, 2026 to make most forms of student loan discharges (although not PSLF) taxable.
“This unwarranted and unlawful withholding of borrowers’ rights has real and significant consequences if not immediately rectified,” said the AFT in its motion for a preliminary injunction. “On January 1, 2026, loan cancellation under the IDR program will be counted as taxable income to borrowers, whereas if loans are cancelled this year, the cancellation will not count has taxable income. It is common for loan balances subject to cancellation to far exceed $100,000. And even for the Public Service Loan Forgiveness program (where taxation is not an issue), borrowers who are entitled to forgiveness now continue to have to put their lives on hold while they wait indefinitely for their loans to be forgiven.”
The court then ordered a briefing schedule, with responses to the AFT’s motions due by mid-October. The court set a hearing date for October 31.
Government Shutdown Delays Student Loan Forgiveness Litigation
In its filing on Thursday, Justice Department attorneys asked for a stay (or pause) in the proceedings and the associated deadlines for responding to the AFT’s motions for class certification and the preliminary injunction, in light of the government shutdown.
“Undersigned counsel for the Department of Justice therefore requests a stay of briefing for Plaintiffs’ motion for preliminary injunction until Congress has restored appropriations to the Department,” reads the filing. Justice Department attorneys said they “greatly regret any disruption caused to the Court and the other litigants.”
The filing also asks the court to cancel the October 31 hearing, and notes that the AFT does not oppose the government’s requests. However, the AFT remains concerned about the looming tax consequences that could hit borrowers whose student loan forgiveness is delayed until next year. As a result, the union reserved the right to ask the court to reset response deadlines and a hearing date if the government shutdown continues to drag into next week.
“Plaintiffs maintain that they and the putative class members face severe tax consequences if the relief sought in their preliminary injunction and class certification motions is not provided before January 1, 2026,” says the filing. “Plaintiffs respectfully request that the Court permit them to file a motion seeking relief from Standing Order No. 25-55 (JEB) by October 10, 2025, which would ask the Court to set a new briefing schedule and hearing date for both motions.”
What Student Loan Borrowers Should Know About The Government Shutdown
While many government operations have been halted as a result of the shutdown (including civil lawsuits involving the federal government in courts nationwide), borrowers are still responsible for making payments on their student loans. And loan servicers can and will still process payments, manage call centers, and review requests for deferments and forbearances. The disbursement of new federal student aid will also continue despite the shutdown.
“The Department will continue to disburse student aid such as Pell Grants and Federal Direct Student loans, and student loan borrowers will still be required to make payments on their outstanding student debt,” reads a memo issued by the Office of Management and Budget on Department of Education shutdown procedures.
However, student loan forgiveness processing could be affected by the government shutdown, as typically the Department of Education must issue a final approval for loan forgiveness and send instructions to loan servicers to discharge the applicable debt. Just before the shutdown, the department sent out mass emails to borrowers notifying them that their student loans qualify for forgiveness under the IBR plan. However, the notices also indicate that the department must notify loan servicers to process the discharge. If the shutdown continues, it could result in delays.