Courts block Trump rule limiting student loan forgiveness for public servants

Two federal judges on June 30 blocked a Trump administration rule that would have let the Education Department cut off student loan forgiveness for employers it said had a “substantial illegal purpose.” The rulings keep the Public Service Loan Forgiveness path open for teachers, nurses, firefighters, social workers and other workers at qualifying public employers.

U.S. District Judge Myong Joun in Massachusetts vacated the rule, saying it was unlawful, arbitrary and capricious, and unconstitutional under the First Amendment. U.S. District Judge Amir Ali in Washington, D.C., issued a similar ruling in a separate case, landing both decisions one day before the policy was set to take effect on July 1, 2026.

The regulation, finalized in October 2025, would have given the Education Department power to disqualify employers from PSLF if officials determined they had engaged in activities the administration opposed. The government said that could include organizations tied to terrorism, illegal immigration, or certain gender-affirming care. Critics warned the language was broad enough to reach nonprofits and public employers working on immigrant aid, diversity programs or transgender health care.

PSLF was created by Congress in 2007 and erases remaining federal student debt after borrowers make 120 qualifying payments while working full time for a qualifying public employer. More than 1 million Americans have already had loans canceled through the program.

The challenge drew a wide coalition. In November 2025, 22 states, the District of Columbia, five cities and counties, five nonprofit employers and five employee associations sued over the rule. The Massachusetts case was brought by the National Council of Nonprofits and other groups. The D.C. case involved nonprofit plaintiffs including the Robert F. Kennedy Center for Justice and Human Rights. Judge Joun noted that more than 100 amici backed the plaintiffs and none supported the government.

The administration defended the policy as a way to stop taxpayer dollars from subsidizing unlawful conduct. Education Undersecretary Nicholas Kent said the department stood behind the rule and argued that PSLF should not support organizations involved in terrorism, illegal immigration or what he described as harm to children.

For borrowers, the block leaves the existing PSLF framework in place for now. Workers who already qualify should keep making their 120 payments, stay in full-time public service and continue documenting employment under the program’s standard rules. The judges also leaned on the Supreme Court’s 2024 decision ending Chevron deference, with Joun saying the Education Department’s statute did not clearly authorize a new employer-disqualification test.