Trump Administration Halts Student Loan Forgiveness Class Action Amid Government Shutdown – Financial Freedom Countdown

The battle over student loan forgiveness took a sharp turn this week after the Trump administration filed papers seeking to pause a major class action lawsuit. The case centers on allegations that the federal government unlawfully blocked or delayed debt relief for borrowers enrolled in income-driven repayment (IDR) and Public Service Loan Forgiveness (PSLF) programs.

Shutdown Cited as Reason for Delay

In court filings, Justice Department lawyers argued that the ongoing government shutdown makes it impossible to continue litigating the case. With funding for the Department of Justice and other federal agencies lapsed, attorneys said they are prohibited from working unless it involves “emergencies involving the safety of human life or the protection of property.”

DOJ Requests Suspension of Deadlines and Hearings

The Trump administration has asked the court to halt deadlines and cancel an October 31 hearing tied to the lawsuit.

The filing noted that while the American Federation of Teachers (AFT) does not oppose the stay, the union remains deeply concerned about the financial consequences of delays for borrowers.

Teachers Union Expands Its Legal Claims

The American Federation of Teachers has been spearheading this legal fight.

The union recently expanded its lawsuit to challenge a range of problems affecting federal repayment and forgiveness programs, from income-driven repayment application backlogs to PSLF Buyback denials.

The union claims the Department of Education has systematically failed to implement new rules meant to expand access to forgiveness.

Push for Class Action Status

In September, the AFT filed to certify the lawsuit as a class action, which would allow all similarly situated borrowers to be included without having to join individually.

If approved, this could open the door for thousands of student loan borrowers to seek relief together in one sweeping case.

Emergency Motion for Immediate Relief

Beyond class action status, the AFT also requested a preliminary injunction, asking the court to issue emergency orders forcing the Department of Education to move forward with forgiveness approvals now; before final rulings are issued.

The urgency comes from looming tax law changes that could leave many borrowers with massive new tax bills starting January 1, 2026.

The Tax Consequences of Delay

Currently, most student loan discharges under income-driven repayment are tax-free. That changes in 2026, when cancelled debt will be counted as taxable income. For borrowers with balances exceeding $100,000, this shift could mean tens of thousands of dollars in unexpected tax liabilities. The AFT argues that every day of delay risks saddling borrowers with devastating financial consequences.

Borrowers Stuck in Limbo

For many borrowers, particularly public service workers expecting forgiveness through PSLF, delays mean putting major life decisions on hold. From buying a home to starting a family, thousands remain in financial limbo, waiting for relief that may be indefinitely stalled.

What Borrowers Need to Know During the Shutdown

Despite the litigation pause, borrowers remain obligated to continue paying their student loans. Servicers are still operational, processing payments, deferments, and forbearances. Pell Grants and new federal loans are also being disbursed. However, loan forgiveness approvals requiring final Department of Education sign-off may be delayed.

Emails Sent to Borrowers Before Shutdown

Just before the shutdown, the Department of Education notified many borrowers that their loans qualify for forgiveness under income-driven repayment. But without departmental approval and instructions to servicers, those cancellations cannot move forward. This leaves thousands of borrowers with a promise of relief; but no certainty on when it will actually arrive.

AFT’s Next Move in Court

While the union did not oppose the administration’s request to delay, it reserved the right to push for new court deadlines if the shutdown drags on.

The AFT argued that the stakes are simply too high to let borrowers face major tax liabilities because of bureaucratic inaction.

Political Deadlock Adds to Borrowers’ Anxiety

With no signs of compromise in Washington, borrowers are left watching two battles play out at once—one in the courts over student loan forgiveness, and another in Congress over the government’s budget.

For many, the uncertainty feels like déjà vu after years of shifting policies, lawsuits, and reversals under multiple administrations.

Outlook: A Crucial Few Months Ahead

If Congress cannot resolve the shutdown quickly, and if courts continue to delay litigation, the clock could run out for many borrowers before tax laws change in January. The next few months may prove decisive for whether student loan forgiveness is delivered on time; or lost in a tangle of politics and procedure.

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Could You Get a $2,000 Tariff Check? Trump’s Dividend Idea Faces Congress and the Courts

President Donald Trump said Thursday he is still considering giving Americans up to $2,000 in rebate checks tied to his sweeping tariff agenda. The idea, which he described as a “dividend to the people of America,” would redirect a share of the hundreds of billions of dollars his tariffs have generated since going into effect this spring.

Could You Get a $2,000 Tariff Check? Trump’s Dividend Idea Faces Congress and the Courts

Starting September 30, 2025, the Trump administration will end the use of paper checks for Social Security benefits, completing the Social Security Transition to Electronic Payments. While more than 99% of seniors are already set up electronically, a small group still receiving paper checks must act now to avoid payment delays. Beneficiaries who haven’t switched yet will need to enroll in direct deposit or request a Direct Express card to keep their monthly benefits arriving on time. This change is part of a broader government effort to reduce fraud, improve efficiency, and save taxpayer dollars.

Trump’s Social Security Upgrade Ends Paper Checks on Sept. 30. What Seniors Must Do Now

JPMorgan Sees 2026 Tax Refund Wave as Trump’s Law Takes Effect

A flood of larger tax refunds could arrive in early 2026, according to JPMorgan Asset Management’s chief global strategist David Kelly. The Internal Revenue Service announced it will keep withholding levels unchanged through 2025, even as Trump’s One Big Beautiful Bill Act (OBBBA) takes effect. That means workers won’t see extra cash in their paychecks this year; but will instead get it back when filing 2025 returns, likely boosting refund sizes. Kelly told clients that these bigger refunds “should work much like a new round of stimulus checks,” adding to household cash flow just as the new year begins. He said the refund surge could give consumer demand a short-term lift, while also shaping how markets digest the policy shift.

JPMorgan Sees 2026 Tax Refund Wave as Trump’s Law Takes Effect

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