In April 2025, a new legal challenge has emerged against the Trump Administration, brought forward by the American Federation of Teachers (AFT). The case focuses on the suspension of income-driven student loan repayment programs, which are critical for millions of borrowers across the United States.
The situation is raising serious concerns, especially as student debt in the U.S. has reached $1.7 trillion. With federal repayment programs now blocked, many are struggling to afford their monthly payments.
What’s Happening With Student Loan Repayment Plans?
The Trump Administration has ordered federal student loan servicers to stop processing applications for all income-driven repayment (IDR) programs. These programs—like IBR (Income-Based Repayment), ICR (Income-Contingent Repayment), PAYE (Pay As You Earn), and SAVE—allow borrowers to make monthly payments based on their income and family size.
Now, due to a “stop work order” issued in March, these repayment plans are no longer available to new applicants or even to existing borrowers who want to recalculate or update their repayment terms.
The administration also removed all online and paper applications for these programs, leaving borrowers without any official way to apply or manage their loans under these plans.
Legal Action From the American Federation of Teachers
The AFT’s lawsuit argues that the Trump Administration’s actions violate federal law, which mandates that these programs must be available. Their legal motion states:
“Without Congressional authorization, the defendants have inexplicably and irrationally issued a Stop Work order shutting down all access to all income-driven repayment plans for borrowers seeking to enroll.”
This action is affecting over one million borrowers, who now have no access to affordable repayment options, which were previously guaranteed by law.
Current Status of the SAVE Plan
The SAVE plan, introduced by the Biden Administration, is also caught in a separate legal battle, which has paused its full rollout. The Trump Administration claims that their stop work order was necessary in light of this conflict.
However, critics argue that this is being used as a reason to halt all other repayment programs, even the ones that pre-date the SAVE plan.
Why the Move to the SBA Is Causing Alarm
Adding more confusion, the Trump Administration has also shifted responsibility for student loan management from the Department of Education to the Small Business Administration (SBA).
The SBA, however, has recently announced a 40% workforce reduction, raising concerns about whether it is equipped to handle such a large-scale program.
This shift, combined with the stop order, is expected to cause more delays, confusion, and service issues for student loan borrowers.