Trump Administration Drops Fight Over Public Service Loan Forgiveness Limits in Win for Millions of Borrowers

The Justice Department on Wednesday dropped its appeals of two court rulings that struck down the Trump administration's restrictions on Public Service Loan Forgiveness, effectively leaving the popular student debt relief program for government and nonprofit workers intact.

The move ends the administration's challenge to a pair of June decisions that threw out a rule allowing the education secretary to disqualify employers from the program if their work was found to have a "substantial illegal purpose." Critics said the rule was designed to punish organizations that work on issues the administration opposes, including immigration and transgender health care.

Justice Department lawyers filed brief joint agreements with the plaintiffs to dismiss the appeals, with each side agreeing to cover its own legal fees and costs. Federal officials gave no explanation for the reversal.

A third appeal, in a related case brought by a coalition of states, remains pending.

Advocates hail the decision

Advocates for borrowers celebrated the move as a major victory for public service workers.

"This is a significant victory for millions of Americans who have dedicated their careers to public service," said Daniel Zibel, chief counsel at Student Defense, an advocacy group that represented plaintiffs in one of the cases.

"The Trump administration's attempt to weaponize public service loan forgiveness against organizations it disagrees with was anti-democratic and unlawful from the start," Zibel said.

The Education Department did not publicly explain the decision to drop the appeals.

What the rule would have done

Public Service Loan Forgiveness cancels the remaining federal student loan debt of people who work for government agencies or qualifying nonprofit organizations after they make 120 monthly payments over 10 years of service. Created by Congress in 2007, the program covers a wide range of workers, including teachers, nurses, firefighters, police officers, social workers and public defenders.

The Trump administration's rule, published in October 2025, would have given Education Secretary Linda McMahon the power to remove employers, rather than individual borrowers, from the program if she determined that their work had a "substantial illegal purpose."

The rule listed activities that could trigger disqualification, including assisting undocumented immigrants, providing gender transition care to minors and engaging in diversity, equity and inclusion efforts that the department considered illegal discrimination. Other listed activities included supporting terrorism and certain protest-related conduct.

Borrowers working for disqualified employers would have stopped earning credit toward forgiveness. Critics warned that the rule could affect people working at schools, public hospitals, legal aid organizations and a range of nonprofit groups.

The administration argued the changes were needed to ensure that taxpayer-funded loan forgiveness did not benefit organizations engaged in illegal activity.

Courts strike it down

The rule was challenged almost immediately. In early November 2025, lawsuits were filed by a coalition of nonprofit groups, labor unions and cities, and separately by 22 states and the District of Columbia.

On June 30, one day before the rule was set to take effect, federal judges in Massachusetts and Washington, D.C., struck it down in separate rulings.

U.S. District Judge Myong J. Joun in Massachusetts ruled that the regulations exceeded the Education Department's authority and violated the First Amendment because they made eligibility depend on an organization's speech, advocacy or viewpoint.

The same day, U.S. District Judge Amir Ali in Washington issued a similar ruling in a case brought by nonprofit organizations. He found that Congress requires that borrowers employed by qualifying organizations be eligible for the program, and that the education secretary could not pick and choose among them.

Legal analysts said the rulings reinforced the view that only Congress can change who qualifies for the program.

The administration appealed all three rulings in late August.

One appeal still pending

On Wednesday, the government dropped its appeal in the Washington case, brought by plaintiffs including the Robert F. Kennedy Center for Justice and Human Rights, and its appeal in the Massachusetts case brought by nonprofits, unions and cities.

Its appeal in the companion case brought by the states remains active in the U.S. Court of Appeals for the 1st Circuit. The government's opening brief in that case is due Nov. 4.

Legal observers say the government is likely to drop that appeal as well, given its decision to abandon the other two on the same day. If it does, the lower court rulings striking down the rule would become final.

Part of a broader fight

The rule grew out of an executive order President Donald Trump signed in March 2025 directing the Education Department to revise the program to exclude organizations engaged in activities the administration considered illegal or harmful.

The dispute over Public Service Loan Forgiveness has been part of a wider battle over federal student aid during Trump's second term. The administration has moved to overhaul repayment plans, reduce the size of the Education Department and roll back debt relief efforts pursued by the Biden administration.

Democratic state attorneys general, labor unions and borrower advocates have repeatedly gone to court to challenge those moves. Opponents argued that the PSLF rule in particular would chill free speech by pressuring nonprofits to avoid work or advocacy that could draw the administration's disapproval.

What it means for borrowers

For now, the program's existing eligibility rules remain in place. Borrowers who work full time for government agencies or qualifying nonprofit organizations can continue to earn credit toward forgiveness as before.

Public Service Loan Forgiveness has grown significantly in recent years after changes that fixed longstanding administrative problems that had led to high rejection rates. More than 1 million borrowers have received forgiveness through the program, according to Education Department figures.

Advocates said the outcome offers reassurance to workers who had worried that their years of service could be wiped out by a change in their employer's status.

Borrowers are generally advised to certify their employment regularly through the Education Department's PSLF tools, keep records of their payments and confirm that their employer qualifies.

Attention now turns to the remaining appeal in the states' case. If the government drops it, the fight over the rule would come to an end, leaving any future changes to the program's eligibility rules largely in the hands of Congress.

The Education Department could also attempt to issue a new rule, though the court rulings would make it difficult to impose similar restrictions without legislative action.