Trump Administration Drops Loan Forgiveness Appeal, Preserving Benefit for Public Service Workers (Chicago, IL) — Teachers, nurses and other public service workers will retain access to a federal student loan forgiveness program under existing employer eligibility rules after the Trump administration abandoned its appeal of a court decision blocking new restrictions.
Illinois Attorney General Kwame Raoul announced the development Oct. 22. He and a coalition of attorneys general sued the administration in November 2025, arguing that the Department of Education was attempting to punish government agencies and nonprofit organizations over policies the administration opposed.
The disputed rule would have allowed the department to disqualify employers it determined had a “substantial illegal purpose.” Raoul’s office said the restrictions threatened organizations that support immigrants, provide gender-affirming health care or operate diversity programs. Employees’ ability to qualify for debt relief would have been affected by their employers’ exclusion.
Public Service Loan Forgiveness, commonly known as PSLF, allows eligible borrowers to have the remaining balance of their federal Direct Loans forgiven after the equivalent of 120 qualifying monthly payments while working full time for a qualifying employer. Borrowers must also meet the program’s repayment requirements.
Congress created the program in 2007 to help people enter and remain in public service careers. In its June decision, the court described the financial challenge behind that policy: substantial educational debt, paired with comparatively low public service salaries, can discourage people from taking or keeping those jobs.
The administration defended its rule as a way to prevent taxpayer dollars from supporting unlawful activity. But U.S. District Judge Myong J. Joun concluded that the department had exceeded its legal authority, adopted arbitrary and capricious regulations and violated the First Amendment. His June 30 ruling vacated the rule, which had been scheduled to take effect July 1.
“The president’s attempt to punish states he disagrees with politically was illegal, and I am pleased with our win in this case,” Raoul said.
The Oct. 22 filing in the U.S. Court of Appeals for the First Circuit records the parties’ agreement to dismiss the administration’s appeal, leaving the lower court’s decision in place.
Raoul’s office said PSLF has helped more than 1 million public servants and serves as a recruitment and retention tool for employers in education, health care and law enforcement.
Borrowers can use the federal government’s PSLF Help Tool at StudentAid.gov to check whether an employer qualifies and submit employment information. Eligibility for forgiveness still depends on meeting the program’s individual loan, payment and employment requirements.
Trump Administration Drops Loan Forgiveness Appeal, Preserving Benefit for Public Service Workers
