Over twenty-one states are now suing the Trump Administration over rules to limit eligibility for Public Service Loan Forgiveness (PSLF). Specifically, the November 3rd filing alleges that the U.S. Department of Education (ED) has changed the definition of a “qualifying employer” to exclude certain organizations—and ultimately disqualify student loan borrowers—from entitlement under PSLF.
Student Loan Forgiveness Update
The lawsuit was filed by the state attorneys general (AGs) from Massachusetts, New York, Colorado, California, Arizona, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Washington, and Wisconsin.
On October 31, 2025, ED issued a final rule—a federal regulation that follows a period of public comment on a proposed rule. In the case of PSLF, ED received approximately 14,000 comments with a wide range of concerns. But ED’s final rule is ultimately consistent with an Executive Order from President Trump which specified that public service should exclude organizations that engage in activities with a “substantial illegal purpose.” This includes agencies that:
- Engage in a pattern of violating state laws;
- Exhibit a pattern of aiding and abetting illegal discrimination;
- Aid or abet infringement of federal immigration laws;
- Support terrorism;
- Provide transgender youth with, or assist them in receiving, gender-affirming medical treatments
Impact on Borrowers
Using the above provisions, let’s look at an example of the potential impact on borrowers. The definition of a “substantial illegal purpose” would include “surgical castration or mutilation” as part of a gender reassignment. But ED’s interpretation went so far as to associate non-surgical, gender-affirming care for minors (aged 19 and under) with genital “mutilation.” And gender-affirming care is legally protected by many Plaintiff States.
Translation: if you’re someone who works at a public health agency that provides gender affirming care, you would no longer be eligible for PSLF under that employer, even if you have already spent 8 years on the job working toward your student loan forgiveness benefit.
But wait. It’s not all gloom and doom.
- If you find yourself in a situation where your employer is deemed ineligible, you will not lose credit for payments you made before the employer has been disqualified.
- If you change jobs to an eligible employer, or if your current employer regains eligibility, you can resume progress toward PSLF since PSLF does not require consecutive 120 months of payments.
Will Public Service Loan Forgiveness Be Cut?
The short answer is PSLF will change, but it will not be eliminated altogether. The AGs lawsuit expresses concern that any city or county government’s opposition to the Trump administration’s policies, such as immigration or DEI, could unfairly lead to employer disqualification. The complaint basically argues that the final rule is an attempt to target those whose mission or politics do not align with the current administration.
Final Thoughts
While there is a lot of political debate surrounding this issue, the important thing to do is stay in communication with your employer. If there are any changes around their designation as an eligible agency, they will receive notification. From there, they can share information with you.
