Two federal judges blocked a Trump rule that would have narrowed PSLF eligibility by redefining qualifying employers. The Education Department is evaluating next steps.
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Two federal judges killed a Trump administration rule that would have narrowed who qualifies for Public Service Loan Forgiveness. The rule was set to take effect July 1.
U.S. District Judge Amir Ali struck down the regulation Tuesday, ruling the Department of Education overstepped its authority. The same day, U.S. District Judge Myong Joun sided with states, cities and nonprofits that sued, calling the policy "contrary to law" and a violation of the First Amendment.
The rule would have changed the definition of a "qualifying employer" under PSLF to exclude organizations that "engage in unlawful activities." Critics said the language was vague enough to let Trump officials cut off any program they disliked – including nonprofits providing legal aid to immigrants, transgender people or diversity programs.
"Congress made clear who qualifies for Public Service Loan Forgiveness, and the Department of Education cannot rewrite that statute by creating new eligibility restrictions that Congress never authorized," said Jaylon Herbin, director of federal campaigns at the Center for Responsible Lending.
PSLF was signed into law in 2007 under George W. Bush. It cancels remaining federal student loan debt after 10 years of qualifying payments for borrowers who work for government agencies or 501(c)(3) nonprofits. Over 9 million borrowers may be eligible, according to a 2022 estimate from Protect Borrowers.
New York Attorney General Letitia James led a coalition of more than a dozen state attorneys general who sued in November. A separate lawsuit from cities, labor unions and nonprofits followed the same month.
"Public Service Loan Forgiveness was created as a promise to teachers, nurses, firefighters, and social workers that their service to our communities would be honored," James said in a statement. "Instead, this administration has created a political loyalty test disguised as a regulation."
Judge Ali's ruling noted that Congress deliberately left the definition of "public service job" broad. "If Congress wished to give borrowers credit for loan payments made while they work only at certain section 501(c)(3) organizations or wished to delegate to the Secretary the authority to make such determinations, it knew how to do so," he wrote. "Yet Congress chose to offer no caveats or delegations."
The U.S. Department of Education is "evaluating next steps," said Under Secretary of Education Nicholas Kent. "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."
For now, the two court orders mean "borrowers do not need to worry about losing eligibility for PSLF based on their employment," said higher education expert Mark Kantrowitz.
The basic requirements remain unchanged: your employer must be a government organization at any level, a 501(c)(3) nonprofit, or another type of nonprofit that provides public service; your loans must be federal Direct loans; and you need to make 120 qualifying payments under an income-driven repayment plan.
Kantrowitz recommends filling out the employer certification form at least once a year and keeping records of confirmed qualifying payments.
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