Judges Rule Against Trump Administration in Major Student Debt Relief Case

Two federal judges have blocked the Trump administration’s attempt to overhaul the Public Service Loan Forgiveness (PSLF) program, delivering a significant legal setback just one day before the new rules were scheduled to take effect.

The separate rulings, issued by federal courts in Massachusetts and Washington, D.C., found that the U.S. Department of Education exceeded its legal authority by introducing sweeping changes that could have denied student loan forgiveness to thousands of public service workers based on the activities of their employers.

The Public Service Loan Forgiveness program, established by Congress in 2007, allows government employees and nonprofit workers; including teachers, nurses, firefighters, military personnel and other public servants, to have their remaining federal student loan debt forgiven after making 120 qualifying monthly payments while working full-time in eligible public service jobs.

The Trump administration had sought to narrow eligibility by allowing the Department of Education to disqualify borrowers employed by organizations deemed to have a “substantial illegal purpose.” The rule identified activities such as facilitating unlawful immigration, certain diversity and inclusion initiatives, and some forms of gender-affirming care as grounds for exclusion, arguing that taxpayers should not subsidize organizations engaged in activities the administration considered unlawful.

However, U.S. District Judge Myong J. Joun ruled that the Education Department lacked the authority granted by Congress to redefine which employers qualify under the loan forgiveness program. He also found that key portions of the rule were overly vague and raised serious First Amendment concerns because they could penalize organizations and employees based on protected speech and viewpoints.

In a separate case, U.S. District Judge Amir Ali reached a similar conclusion, siding with nonprofit organizations that challenged the regulations. Both courts concluded that the administration’s changes risked turning the loan forgiveness program into a political tool rather than a neutral benefit established by federal law.

The lawsuits were brought by more than 20 states, several cities, nonprofit organizations and advocacy groups, which argued that the new rules would unfairly punish workers who chose careers in public service. Plaintiffs warned that the restrictions would discourage graduates from entering lower-paying government and nonprofit jobs, undermining the very purpose of the PSLF program.

With the rulings, the existing Public Service Loan Forgiveness eligibility rules remain in place while the legal battle continues. Borrowers working for qualifying government agencies and nonprofit organizations will continue to be eligible for loan forgiveness under the long-standing requirements unless a higher court overturns the decisions.

The Trump administration has indicated it is reviewing the decisions and is expected to appeal. The cases are likely to become another major legal battle over federal education policy and the limits of executive authority in reshaping programs created by Congress.

The rulings come amid broader changes to the U.S. student loan system, including the phase-out of the Biden-era SAVE repayment plan and the introduction of new repayment options under recently enacted federal legislation. While those repayment reforms continue to move forward, the courts have made clear that changes to the Public Service Loan Forgiveness program must remain within the authority granted by Congress.