US judges block Trump’s limits on student loan forgiveness program

June 30 (Reuters) – Two federal judges on Tuesday blocked U.S. President Donald Trump’s administration from implementing a new rule stripping public service workers of eligibility for federal student loan forgiveness if it deems their employers to have a “substantial illegal purpose.”

U.S. District Judge Myong Joun in Boston sided with Democratic-led states, cities and nonprofits that argued the Department of Education‘s rule would allow it to target groups supporting immigration rights, transgender healthcare and other causes the Trump administration disfavors by disqualifying them from the Public Service Loan Forgiveness Program (PSLF).

A short while later, a second judge in Washington, D.C., U.S. District Judge Amir Ali, likewise struck down the rule before it could take effect on Wednesday at the behest of four nonprofits involved in, among other things, immigrant rights advocacy.

The program at issue allows borrowers to have their federal student loans forgiven after 10 years working for government or nonprofit employers. More than 1 million borrowers have received debt relief since Congress established it in 2007.

Trump has argued the program has been exploited by activist organizations that harm U.S. national security and values, and ordered the Education Department to narrow eligibility.

Joun, who like Ali was appointed by former Democratic President Joe Biden, said Congress designed the program to encourage people to pursue careers in public service even when jobs require educational training that imposes substantial financial burdens on them.

He said the Education Department now wanted to disqualify employers, and consequently borrowers, from participating in the program by redefining what constitutes a “public service” job without any legal authority to do so based on policy objectives that Congress never identified as relevant for eligibility.

Joun said the department was doing so through a rule that also unconstitutionally discriminates on the basis of viewpoint in violation of the U.S. Constitution’s First Amendment by targeting nonprofit employers engaged in speech and activities that run counter to Trump’s agenda.

“Indeed, the record further demonstrates that the Final Rule has already chilled protected speech,” the judge wrote.

Under Secretary of Education Nicholas Kent in a statement said the Education Department is evaluating next steps for its “commonsense policy.”

“The Public Service Loan Forgiveness Program is intended to support Americans who serve the public good, not to subsidize organizations that engage in terrorism, facilitate illegal immigration, or support the mutilation of children,” he said.

LOYALTY TEST

New York Attorney General Letitia James, a Democrat who helped lead 22 states and the District of Columbia in a legal challenge to the rule, said Joun’s ruling “stopped the federal government from turning a program created to honor public service into a weapon for political retaliation.”

“Public servants should not have to pass a political loyalty test to earn the loan forgiveness they were promised,” she said in a statement.

Trump in a March 2025 executive order said the program has “misdirected tax dollars into activist organizations that not only fail to serve the public interest, but actually harm our national security and American values.”

His order directed the Education Department to revise regulations governing the program to redefine what constitutes “public service” work to exclude organizations that engage in activities that have a “substantial illegal purpose.”

The Education Department did so with a final rule published in October that defined “substantial illegal purpose” as covering activities that include aiding illegal immigration; supporting terrorism; engaging in illegal discrimination; and participating in the “chemical and surgical castration or mutilation of children.”

The plaintiffs in both cases sued in November to have the rule blocked from taking effect, saying it was clearly designed to target causes the administration disfavors.

Joun said the rule “does just that by threatening to revoke PSLF eligibility from borrowers who, among other things, lawfully assist immigrants; teach diversity, equity, and inclusion practices; and facilitate gender-affirming care.”

Reporting by Nate Raymond in Boston; Editing by Chizu Nomiyama, Sanjeev Miglani, Stephen Coates and Cynthia Osterman