Judges strike down Trump’s restrictions on loan forgiveness for public servants

Summary

• U.S. District Judge Myong J. Joun rules against Trump administration
• Judge Amir H. Ali supports civil rights groups in D.C. case
• Trump rule targeted employers aiding undocumented immigrants and DEI
• 22 state attorneys general led coalition suing education department

Two federal judges on Tuesday struck down the Trump administration’s restrictions on a popular student-loan-forgiveness program for public servants, a day before the new rule was set to take effect.

U.S. District Judge Myong J. Joun in Massachusetts sided with a group of nonprofits, states, cities and unions that challenged the legality of the administration’s revised eligibility requirements for Public Service Loan Forgiveness (PSLF), which cancels the education debt of government and nonprofit employees after 10 years of service and 120 monthly loan payments.

In a separate but related case, U.S. District Judge Amir H. Ali in the District of Columbia ruled on Tuesday in favor of civil rights groups that sued the Education Department to stop the eligibility changes.

The new rule would have given the education secretary the authority to disqualify employers – not individuals – who engage in activities the Education Department deems to have a “substantial illegal purpose,” such as assisting undocumented immigrants, providing gender transition care for minors or engaging in diversity, equity and inclusion.

Joun said the regulation is “contrary to law and promulgated in excess of statutory authority, is arbitrary and capricious, and violates the First Amendment.”

He added: “The administration undoubtedly enjoys broad authority to advocate for its own policies. It may ‘say what it wishes’ and ‘select the views that it wants to express’ … But it may not leverage the PSLF program to compel plaintiffs to conform their conduct to policy preferences that have not been enacted into law. Administrations change with elections; criminal laws do not.”

Under Secretary of Education Nicholas Kent said the Education Department is evaluating its next steps and stands behind its “commonsense policy.”

“The Public Service Loan Forgiveness Program is intended to support Americans who serve the public good, not to subsidize organizations that engage in terrorism, facilitate illegal immigration, or support the mutilation of children,” Kent said in a statement.

The department convened a panel of higher education experts last summer to deliver on an executive order President Donald Trump signed in March 2025 to exclude employers that he said support “illegal immigration, child trafficking, pervasive damage to public property and disruption of the public order.” The advisory panel failed to reach a consensus, clearing the way for the department to publish a rule of its own making.

Liberal lawmakers and advocacy groups accused Trump of weaponizing a program Congress created in 2007 to encourage college graduates to enter fields that serve the public good such as teaching and law enforcement. More than 1.2 million people have had their debt forgiven through the PSLF program as of April, according to the most recent data from the Education Department.

Within days of the Education Department releasing the 185-page rule in October, a group of 22 state attorneys general and a coalition of more than a dozen nonprofits, cities and unions filed two separate lawsuits. The cases were later consolidated.

“PSLF is a bipartisan promise to those who choose to work in public service, regardless of viewpoint, and the administration’s attempt to hold this congressionally mandated program hostage was not just unlawful, but part of an alarming broader assault on those committed to public service,” said Skye Perryman, president and chief executive of Democracy Forward, a legal organization that served as co-counsel in the lawsuit.

As it stands, nonprofit employees are eligible for student loan forgiveness if they focus on areas that serve the public good, such as education, public health or public interest law. The criteria are broad enough to qualify hundreds of thousands of student loan borrowers, but the Trump rule threatened to upend the program.

The rule would have disqualified any payments a borrower made on student loans after that person’s employer was kicked out of the program. Employers would have had the right to appeal, but many who opposed the revisions feared the process would have been too politicized to be fair.

“Public servants should not have to pass a political loyalty test to earn the loan forgiveness they were promised,” said New York Attorney General Letitia James, who led the coalition of state AGs. “This rule was a blatant attempt to punish teachers, nurses, firefighters, social workers, and other public servants for working in states or for organizations that this administration does not like.”