Trump administration drops appeal of ruling that struck down Public Service Loan Forgiveness overhaul

Court decision vacating the rule stands, leaving the program as Congress designed it

By LineZotpaper

Published22 October 2026

Read Time2 min

The Trump administration has dropped its appeal of a federal court ruling that struck down its overhaul of the Public Service Loan Forgiveness program, ending an effort that would have barred some public servants from loan forgiveness. In a filing on Wednesday, the administration withdrew its appeal of the June 30 ruling that found the overhaul unlawful, without providing an explanation.

The Public Service Loan Forgiveness (PSLF) program cancels outstanding federal student debt for eligible borrowers who work for government agencies, public schools, fire and police departments, public hospitals and nonprofits, after 120 monthly payments, or 10 years of participation. Nearly 720,000 federal student loans were discharged through the program between 2018 and mid-2025, according to the Education Data Initiative.

The rule proposed in August 2025 would have barred borrowers whose employers engage in "a substantial illegal purpose," including organizations that support terrorism, violate immigration laws or are involved in what the rule described as the "chemical and surgical castration or mutilation of children." It also covered trafficking, violations of state law and "violence for the purpose of obstructing or influencing federal government policy." The rule was finalized in October 2025.

The overhaul was challenged by Public Citizen Litigation Group and Student Defense on behalf of the Robert & Ethel Kennedy Human Rights Center, the American Immigration Council, and cities including Albuquerque, New Mexico; Boston; and Chicago. They argued the Education Department had been given excessive latitude to decide what counted as a substantial illegal purpose. In June, U.S. District Judge Myong Joun in Massachusetts vacated the rule, saying it overstepped the department's authority and threatened First Amendment free-speech protections. District Judge Amir Ali in Washington issued a similar ruling the same day.

Advocates welcomed the administration's decision. Dan Zibel, chief counsel of the advocacy group Student Borrowers, called it "a significant victory for millions of Americans who have dedicated their careers to public service." Diane Yentel, CEO of the National Council of Nonprofits, said in a statement that the outcome gives nonprofit employees "the certainty that the loan relief they've earned through years of public service will be there for them." The Department of Education did not immediately respond to a request for comment.

Analysis

Why This Matters

The court's order vacating the rule stands, meaning public servants keep access to the forgiveness pathway the program provides.
The decision ends a policy fight over whether the Education Department could police employers' activities through the student loan system, a question the courts said it could not.
Borrowers in public service avoid the uncertainty of having their eligibility tested against a vague "substantial illegal purpose" standard.

Background

Public Service Loan Forgiveness is a federal program that cancels outstanding debt for borrowers in public-service jobs after 10 years of qualifying payments. Eligible employers include government agencies, public schools, public safety departments, public hospitals and nonprofits. The Trump administration moved to narrow eligibility by disqualifying borrowers whose employers engaged in illegal activities, a change finalized in October 2025 and blocked by federal judges before it was scheduled to take effect in July.

Key Perspectives

The Trump administration: Officials argued the rule was about "supporting public servants who strengthen their communities and serve the public good, not benefiting businesses engaged in illegal activity that harms Americans," as under secretary of education Nicholas Kent said when it was announced. The administration dropped its appeal without explanation.

Borrower advocates and nonprofit groups: They hailed the decision as a victory for public servants. Dan Zibel of Student Borrowers said it matters for "millions of Americans who have dedicated their careers to public service," and Diane Yentel of the National Council of Nonprofits said it gives nonprofit employees certainty that earned loan relief will be there for them.

The federal courts: Two judges found the rule unlawful. Judge Myong Joun said the Education Department overstepped its authority and threatened First Amendment protections, and Judge Amir Ali issued a similar ruling on the same day.

What to Watch

Whether the Education Department attempts a new version of the rule or revisits the policy through other regulatory channels.
How quickly borrowers and employers are informed that the vacated rule will not take effect.
Any congressional response over how the program should treat employers accused of illegal activity.

Sources

Public Service Loan Forgiveness overhaul dropped, filing shows · Moneywatch - CBSNews.com

Checked

10 claims in this story checked against 1 source: 8 supported.

Show each claim

SupportedThe Trump administration dropped its appeal of the ruling that struck down the PSLF overhaul.Moneywatch - CBSNews.com: “In a filing on Wednesday, the Trump administration said it was dropping its appeal of a June 30 federal court ruling that found the overhaul unlawful”
Partly supportedThe court decision stands, leaving PSLF as Congress designed it.Moneywatch - CBSNews.com: ““With the appeal dismissed, the court's order vacating the rule stands, and PLSF remains as Congress designed it,” Diane Yentel, CEO of the National Council of Nonprofits, said in a statement.”
Partly supportedDropping the appeal ended an effort that would have barred some public servants from loan forgiveness.Moneywatch - CBSNews.com: “The Trump administration has halted its efforts to overhaul the Public Service Loan Forgiveness program, ending a plan that could have blocked some U.S. workers from tapping the popular lending program.”
SupportedThe administration withdrew its appeal in a Wednesday filing, without explaining its decision.Moneywatch - CBSNews.com: “In a filing on Wednesday, the Trump administration said it was dropping its appeal of a June 30 federal court ruling that found the overhaul unlawful, without providing an explanation for its decision.”
SupportedThe rule would have barred borrowers whose employers engaged in “a substantial illegal purpose.”Moneywatch - CBSNews.com: “The rule sought to disqualify applicants from the program if their employer engaged in “a substantial illegal purpose.””
SupportedThe rule included organizations involved in “the chemical and surgical castration or mutilation of children.”Moneywatch - CBSNews.com: “The proposed revamp said that employees who work for organizations that support terrorism, violate immigration laws or are involved in what the rule described as the “chemical and surgical castration or mutilation of children” would be barred.”
SupportedNearly 720,000 federal student loans were discharged through PSLF between 2018 and mid-2025.Moneywatch - CBSNews.com: “Almost 720,000 federal student loans were discharged through the program between 2018 and mid-2025, according to the Education Data Initiative”
SupportedEligible borrowers can receive forgiveness after 120 monthly payments, or 10 years of participation.Moneywatch - CBSNews.com: “The program cancels outstanding debt for eligible borrowers who make 120 monthly payments, or 10 years of participation.”
SupportedDan Zibel called the decision “a significant victory for millions of Americans who have dedicated their careers to public service.”Moneywatch - CBSNews.com: “Dan Zibel, chief counsel of the advocacy group Student Borrowers, called it a “significant victory for millions of Americans who have dedicated their careers to public service.””
SupportedDiane Yentel said the outcome gives nonprofit employees certainty that their earned loan relief will be there for them.Moneywatch - CBSNews.com: ““This outcome gives nonprofit employees the certainty that the loan relief they've earned through years of public service will be there for them, so they can keep doing the work that strengthens the communities they serve.””