More than 20 Democrat-led U.S. states have launched a major legal challenge against President Donald Trump’s recently finalized policy, which seeks to reshape the Public Service Loan Forgiveness (PSLF) program. This new rule, introduced by the U.S. Department of Education, could prevent thousands of dedicated teachers, students, and other public service workers from receiving student loan forgiveness if their employers are deemed to have a “substantial illegal purpose.”
The states argue that this new regulation directly undermines the original intent of the PSLF scheme. Established in 2007, the program was designed to offer federal student loan forgiveness to graduates working in government and non-profit sectors after 10 years of consistent, qualifying payments. The lawsuit asserts that the administration has exceeded its legal authority, potentially jeopardizing the stability of public sector workforces that are already grappling with staffing shortages.
States Lead Coordinated Legal Action
The coordinated legal effort began in Massachusetts, spearheaded by a powerful coalition including New York, Massachusetts, California, and Colorado. These states contend that the new policy unlawfully restricts access to loan forgiveness and introduces vague, arbitrary standards. They have formally requested a federal judge to declare the rule invalid and immediately block its enforcement.
New York Attorney General Letitia James emphasized the political nature of the new rule, calling it “a political loyalty test disguised as a regulation.” As quoted by the Associated Press, James stated it is “unjust and unlawful to cut off loan forgiveness for hardworking Americans based on ideology.”
In a related move, a coalition of prominent U.S. cities, including Boston, Chicago, Albuquerque, San Francisco, and Santa Clara, along with the National Council of Nonprofits, has also filed a separate lawsuit in Massachusetts. Further legal action is anticipated from organizations like Robert F. Kennedy Human Rights, the American Immigration Council, and The Door, a legal aid group, all represented by Student Defense and Public Citizen.
Policy Changes Under Scrutiny
Under the Trump administration’s revised policy, employers could lose their PSLF eligibility if federal officials determine they engage in activities such as “chemical castration” of children, human trafficking, illegal immigration, or supporting terrorist groups. The term “chemical castration” in this context specifically refers to the use of hormone therapy or puberty-blocking drugs, which are standard components of gender-affirming care for transgender youth.
Education Under Secretary Nicholas Kent, in a statement cited by the Associated Press, defended the reform. He claimed it ensures “taxpayer dollars do not subsidise organisations involved in terrorism, child trafficking, and transgender procedures that are doing irreversible harm to children.” Kent also stated that the Department intends to apply the rule neutrally, without regard to an organization’s ideology or mission.
Concerns for Public Sector Workers
Despite the administration’s assurances, the states maintain that the Education Department has introduced excessively broad terms like “substantial illegal purpose.” This ambiguity, they argue, could potentially exclude entire sectors crucial to public welfare, such as schools, hospitals, and local government agencies, from PSLF eligibility. They assert that Congress never granted such expansive discretion and that these changes directly violate the spirit and letter of the 2007 law.
Since its inception, the PSLF program has provided life-changing student loan relief to over one million Americans, including dedicated teachers, nurses, firefighters, and public defenders. Critics of the new rule warn that its implementation could sever this vital lifeline, jeopardizing financial stability for thousands of students and educators across the United States. Ready to navigate global policies? Secure your overseas future. Get expert guidance now!