Alleged politicization of public service student loan forgiveness sparks lawsuit against Trump administration

On Monday, a coalition of more than a dozen cities, unions and nonprofits filed a lawsuit to block a new Education Department rule they say will punish organizations doing work the Trump administration opposes on ideological grounds. 

Education on Oct. 30 issued a final rule to exclude organizations that engage in unlawful activities from participating in the Public Service Loan Forgiveness program. Under PSLF, individuals who work at an eligible government agency or nonprofit for 10 years and make monthly payments during that time can have the remainder of certain federal student loan balances waived. 

The new rule, which is the result of a March executive order, lets the Education secretary remove entities from the program for activities including “aiding and abetting violations of federal immigration laws,” “engaging in a pattern of aiding and abetting illegal discrimination” or providing certain medical procedures to trans youth that violate federal or state law. 

“[PSLF] was meant to support Americans who dedicate their careers to public service — not to subsidize organizations that violate the law, whether by harboring illegal immigrants or performing prohibited medical procedures that attempt to transition children away from their biological sex,” Undersecretary of Education Nicholas Kent said in a statement. 

Organizations determined to be noncompliant with the new rules will receive notice and have an opportunity to respond, according to a fact sheet. They can reapply for inclusion in PSLF in 10 years or enter into a corrective action plan. 

The rule goes into effect on July 1, 2026. 

Democracy Forward and Protect Borrowers are representing the coalition behind the lawsuit. The legal organizations argued that working for the government or a 501(c)(3) nonprofit should automatically qualify borrowers for the PSLF program and that Education’s rule contravenes the First Amendment. 

“The Trump-Vance administration is telling a generation of dedicated public servants that their work only counts if it aligns with a MAGA political agenda,” said Persis Yu, deputy executive director and managing counsel of Protect Borrowers, in a statement. “This betrays the nonpartisan promise of PSLF and the core principles of our nation.”  

Some of the plaintiffs include the city of Chicago, the National Council of Nonprofits and the American Federation of State, County and Municipal Employees. 

While this rule would give the Education Department more enforcement authority, the Trump administration has halved its workforce as part of an effort to eliminate the department.