Federal judges in Massachusetts and Washington, D.C., on Tuesday blocked the Trump administration’s overhaul of the Public Service Loan Forgiveness, or PSLF, program, ruling in favor of nonprofit groups and state attorneys general just one day before the new rules were set to take effect.
PSLF is a federal student loan forgiveness program created by Congress in 2007 to encourage graduates to work in government and nonprofit jobs. Under the program, eligible borrowers can have their remaining federal student loan debt canceled after making 10 years of qualifying payments while working in public service.
U.S. District Judge Myong Joun in Massachusetts vacated the Education Department’s rule, saying the agency exceeded its authority and raised serious First Amendment concerns. In a separate case, U.S. District Judge Amir Ali in Washington, D.C., issued a similar ruling.
The Trump administration had sought to tighten eligibility rules by allowing the Education Secretary to strip PSLF benefits from workers whose employers were deemed to have a “substantial illegal purpose.”
That included organizations allegedly involved in child trafficking, illegal immigration, supporting terrorist groups, or what the administration described as “chemical castration” of children, a definition that included puberty blockers and hormone therapy.
Under Secretary of Education Nicholas Kent said the department is evaluating next steps.
“The Department stands behind this commonsense policy to ensure that taxpayer dollars are never used to subsidize illegal activities,” Kent said in a statement, according to the Associated Press.
PSLF Rule Faces Legal Pushback
Judge Joun said the new rule effectively imposed the administration’s policy preferences on employers and failed to properly tie its definitions of illegal conduct to existing criminal statutes.
“The Department cannot create new criminal prohibitions through rulemaking,” Joun wrote.
He also questioned why such sweeping changes were necessary when the department’s own estimates suggested fewer than 10 employers per year would be affected.
Plaintiffs welcomed the ruling. Diane Yentel, president and CEO of the National Council of Nonprofits, called it a win for nonprofit workers and the communities they serve, according to the Associated Press.
Aaron Ament, president of Student Defense, said public servants should not fear losing loan relief because of their employer’s mission or political views.
Borrower Pressure Keeps Rising
The ruling comes as pressure across the U.S. student loan system continues to build. Millions of borrowers remain in transition after the collapse of the Biden-era SAVE plan, or Saving on a Valuable Education, an income-driven repayment program designed to lower monthly payments.
Financial stress has also intensified. Federal Reserve Bank of New York data showed delinquent student debt climbed to a record $171.4 billion in the first quarter of 2026, while 3.6 million borrowers were already in default.
Earlier this month, Sen. Elizabeth Warren (D-Mass.) and more than 60 Democratic lawmakers urged Education Secretary Linda McMahon to cancel debt for borrowers already eligible for relief programs, including PSLF, warning that recent policy changes could push more Americans into financial distress.
Operational concerns have also grown after a recent inspector general report found Federal Student Aid, which manages the federal government’s $1.7 trillion student loan portfolio, lost roughly 40% of its workforce during DOGE-era staffing cuts, raising concerns about oversight and borrower support.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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