A coalition of 22 U.S. states has filed a lawsuit against the Trump administration, contesting a recently introduced rule that restricts eligibility for the Public Service Loan Forgiveness (PSLF) program. The complaint, lodged in the U.S. District Court for the District of Massachusetts, asserts that the administration overstepped its authority by excluding certain employers from the PSLF program based on what the Department of Education claims to be a “substantial illegal purpose.”
The PSLF program, established to forgive federal student loan debt after borrowers make qualifying payments for ten years while employed in eligible public service jobs, has been a critical financial relief for many. According to the states, the only job category explicitly exempt from PSLF eligibility is that of a member of Congress. Therefore, they argue, the new rule’s exclusion of government jobs contradicts the statute and exceeds the scope of the law.
The states contend that the rule is “arbitrary and capricious,” claiming it unfairly targets previously eligible employers. The new regulation defines an organization as having a substantial illegal purpose if it has engaged in certain violations, including breaches of federal immigration laws, terrorism-related activities, child abuse, discrimination, and violations of state laws.
In their complaint, the states argue that these definitions are pretextual, designed to grant the administration “unfettered discretion” in determining when an employer has engaged in such activities. This, they claim, could deter lawful pursuits that the administration disapproves of, ultimately impacting many public service workers who rely on the PSLF program for financial stability.
The rule was introduced in March 2023, following directives from the Trump administration, which described it as a form of “commonsense reform.” Officials have argued that supporting organizations involved in illegal activities contradicts the goals of the PSLF program, which aims to encourage public service work.
The outcome of this lawsuit could have significant implications for many public service employees who count on the PSLF program to alleviate their student loan burdens. As the legal proceedings unfold, the states are hopeful that the court will recognize their claims and protect the interests of borrowers who contribute to society through public service roles.
