Two federal judges have temporarily blocked a Trump administration rule that would have narrowed who counts as an eligible employer under the Public Service Loan Forgiveness program, a win that preserves relief prospects for millions of federal student-loan borrowers. The rulings, issued this week, stop the policy that was set to take effect July 1 and clarify that employment-based forgiveness can’t be restricted by a new regulatory test tied to an employer’s activities.
The rulings came from U.S. District Judges Amir Ali and Myong Joun, who sided with states, municipalities and nonprofit groups that argued the Department of Education exceeded its authority and violated constitutional protections. The decisions mean borrowers do not need to fear losing PSLF eligibility because of their workplace while the legal fights continue.
Critics called the rule a political filter
State attorneys general and a coalition of cities, unions and nonprofit organizations challenged the administration last November after it published a rule specifying that employers could be disqualified from PSLF if they “engage in unlawful activities.” Plaintiffs said the language was vague and would give the Education Department sweeping discretion to bar organizations it found objectionable.
New York Attorney General Letitia James described the change as a betrayal of the program’s promise to professionals such as teachers, first responders and social workers. Supporters of the lawsuits warned the rule risked turning forgiveness into a litmus test for political or policy disagreements rather than a neutral determination of public service.
In his opinion, Judge Ali emphasized Congress explicitly defined who qualifies for PSLF and did not include carve-outs or delegate to the secretary the authority to create them. Judge Joun found the rule ran afoul of the law and also raised First Amendment concerns, siding with the states and nonprofit plaintiffs.
Reacting to the rulings, the Department of Education said it is “evaluating next steps.” Undersecretary Nicholas Kent defended the agency’s intent, saying the program should support Americans who serve the public good and should not be used to subsidize organizations that break the law or engage in extreme misconduct.
What this means for borrowers right now
For most people pursuing forgiveness under the program, the immediate takeaway is relief: employment at a government agency or a qualifying nonprofit continues to count for PSLF while the court orders remain in place. Higher-education experts say borrowers should keep documenting their employment and payments rather than assuming any change has already taken effect.
- Employer type: PSLF generally covers work for federal, state or local governments and for many nonprofits, including organizations recognized under 501(c)(3).
- Loan type: Only federal Direct loans qualify for PSLF unless borrowers consolidate other federal loans into a Direct Loan before applying credit toward forgiveness.
- Payment requirement: Borrowers must make 120 qualifying payments while on an approved repayment plan—often an income-driven option—to earn forgiveness.
Experts recommend filing an Employer Certification Form at least once a year and saving confirmations of qualifying payments. That paperwork is the clearest way to establish that your employment and loan payments meet PSLF criteria if the litigation produces further changes.
Protect Borrowers, a nonprofit, estimated in 2022 that more than 9 million people might be eligible for PSLF; the recent rulings protect that eligibility for now but do not end the policy debate. If the department decides to appeal, or if a higher court issues a different ruling, the program’s future rules could shift—making careful record-keeping more important for borrowers than ever.
Jaylon Herbin, director of federal campaigns at the Center for Responsible Lending, said the decisions reinforce that Congress — not an agency — sets the boundaries for PSLF, calling the outcomes an important victory for public servants and the rule of law.
As the case proceeds, borrowers should monitor official announcements from the Department of Education and continue following standard PSLF practices: certify employers, track payments, and consult trusted counselors or legal aid if questions arise about eligibility.
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