The U.S. Department of Justice withdrew two appeals Wednesday, effectively ending the Trump administration’s effort to finalize a rule that federal judges had blocked and that critics said could have restricted access to Public Service Loan Forgiveness for teachers, health workers, legal aid attorneys and nonprofit employees.
The proposed regulation would have given the U.S. Education Secretary the authority to deny forgiveness to borrowers whose employers were found to have a “substantial illegal purpose,” language that advocates warned could apply to organizations serving immigrants, transgender youth and other contested constituencies. Two federal judges enjoined the rule in separate decisions earlier this year.
More than 20 states, together with nonprofit groups and cities, challenged the regulation in court. The Justice Department’s withdrawal of the appeals was recorded in agreements filed Wednesday, under which both sides agreed to bear their own legal fees. Federal officials did not provide a public explanation for ending the legal challenges.
Public Service Loan Forgiveness, a program created to erase federal student loan debt for qualifying public servants after 10 years of eligible payments, has helped more than 1 million borrowers obtain relief.
“The Trump administration's attempt to weaponize public service loan forgiveness against organizations it disagrees with was anti-democratic and unlawful from the start,” said Dan Zibel, an attorney for the group Student Defense.
Who challenged the rule
- More than 20 state attorneys general and numerous nonprofit organizations and cities filed lawsuits against the rule.
- Two federal judges issued rulings blocking the regulation on legal grounds that included potential violations of free speech rights, according to the court decisions cited in the filings.
- The Justice Department had appealed those rulings before withdrawing the appeals this week.
The rule’s critics argued that its broad language risked denying forgiveness to borrowers whose employers engaged in constitutionally protected speech or lawful advocacy. Supporters of the litigation framed the withdrawal as a win for public employees who rely on PSLF for career and financial planning in government, education and nonprofit sectors.
Agreements and next steps
- The withdrawal of appeals was documented in agreements filed Wednesday; the filings state that each side will pay its own legal fees.
- No additional appeals or further litigation in these cases were announced in the filings referenced.
- The Education Department and the Justice Department did not provide a public explanation of the decision in the filings cited.
The litigation and its resolution come amid ongoing national debate over federal student loan policy, loan forgiveness programs and the administration of borrower relief. The decisions by the judges and the subsequent withdrawal of appeals end this particular legal effort to change PSLF’s eligibility rules.
