Two Federal Courts Vacate PSLF Rule
Adopting several of the legal arguments set out in the Public Comment previously submitted by the Barbara McDowell Social Justice Center, Federal Courts in Massachusetts and the District of Columbia, on June 30, 2026, struck down the United States Department of Education’s ("ED") Final Rule on eligibility under the Public Service Loan Forgiveness (“PSLF”) program. The Rule, scheduled to go into effect on July 1st, would have disqualified PSLF loan forgiveness based on the Trump Administration’s disapproval of an employer’s policy positions and activities that the Administration had prejudged as “substantially illegal.” Collectively, the decisions are a major victory for public service and non-profit professionals, the organizations they serve and the communities that depend on them and a significant rebuke to the Trump Administration’s latest effort at political weaponization.
For nearly two decades, the PSLF program has provided loan forgiveness to borrowers in public service jobs based on a clear definition of public service, namely working in public service for a governmental agency, a 501(c)(3) organization, or other specified employers. To date, the program has served its purpose with more than a million borrowers having had billions in their student debt discharged.
Aligning with President Trump’s March 2025 Executive Order, the ED sought to materially alter the PSLF program and public service loan forgiveness through rulemaking that materially changed the definition of qualifying “public service job” to require that an employer certify that it does not have a “substantial illegal purpose,” based on whether it has engaged in what the ED has identified as six kinds of “illegal activity” that can trigger disqualification. The ED defined those “illegal activities” in such broad terms that the Rule could allow for an employer’s disqualification based solely on lawful activities that this Administration disfavors such as efforts to protect immigrants’ rights; promote diversity, equity, and inclusion; encourage civic participation; or provide gender-affirming care to minors.
The Center joined legal aid organizations, social justice groups, faith-based organizations, state and local governments, public and private K-12 schools, institutions of higher education, mental health providers, environmental groups, and hundreds of private citizens in opposition to the proposed changes to the PSLF program by submitting a formal Public Comment in September 2025 urging the ED to withdraw its proposed PSLF Rule. The Center argued that the proposed Rule unlawfully restricted PSLF eligibility and politicized an historically bipartisan program that was created to support public service. A link to the Center’s Public Comment can be found here.
Despite receiving almost 14,000 Public Comments objecting to the proposed PSLF Rule, the ED made no material substantive changes to its proposal, and, on October 31, 2025, promulgated its Final PSLF Rule, with an effective date of July 1, 2026. As set out in the Comments, the Final PSLF Rule, in violation of statutory and Constitutional rights, interjects ideological bias into a long-standing nonpartisan PSLF program. Further, the Rule grants the Secretary nearly unchecked discretion to determine, without any meaningful right of review, whether an employer is engaged in activities with a substantial illegal purpose. The harm to public service is evident - once an employer is disqualified under the Rule, its employees can no longer receive loan forgiveness under a PSLF loan unless they leave their jobs and find new employment with a qualifying employer that is in good standing. An employer’s disqualification lasts ten years or until the Secretary approves the employer’s corrective plan.
The Final Rule prompted three Federal lawsuits in November 2025. Two cases, treated together as associated cases, were brought in the District of Massachusetts, one by a coalition of cities, unions and advocacy organizations (National Council of Nonprofits et al. v. McMahon et al.) and the other by a coalition of 22 states and the District of Columbia (Commonwealth of Massachusetts et al. v. DOE). The Center joined with one of the plaintiffs (Legal Aid DC) and its counsel (Protect Borrowers) in the National Council case in a panel discussion of the PSLF Final Rule at the ABA/Equal Justice Conference in May 2026.
The third case was commenced in the District of Columbia by four non-profits (Robert F. Kennedy Human Rights et al. vs. Linda McMahon and DOE). All three cases were submitted on cross-motions for summary judgment requesting that the Courts vacate the PSLF Rule. Among the legal infirmities asserted were: (1) the ED exceeded its statutory authority and violated existing law by attempting to redefine PSLF eligibility beyond what Congress intended; (2) the Final Rule was arbitrary and capricious in violation of the Administrative Procedure Act; and (3) the Final Rule violated fundamental First Amendment rights by introducing politics and ideology into a neutral-based program, thereby chilling the actions of public service organizations and their employees.
One day before the Final Rule’s July 1 effective date, Judge Joun in Boston and Judge Ali in Washington issued their rulings vacating the PSLF Final Rule in its entirety. Judge Joun concluded: “The Final Rule is contrary to law and promulgated in excess of statutory authority, is arbitrary and capricious, and violates the First Amendment.” Judge Ali similarly ruled that the Final PSLF Rule was contrary to and exceeds the Secretary’s authority under the Higher Education Act.
Copies of their rulings can be found at:
https://democracyforward.org/wp-content/uploads/2026/06/ECF-113-Memorandum-Opinion.pdf
https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2025cv3860-47