Trump administration is sued over student loan forgiveness changes
In a swift rebuke of the Trump administration’s restrictions on a popular student-loan-forgiveness program for public servants, nonprofits, states, cities and unions filed two separate lawsuits Monday to challenge the changes.
The lawsuits arrived days after the Education Department released revisions to eligibility requirements for Public Service Loan Forgiveness, which cancels the education debt of government and nonprofit employees after 10 years of service and 120 monthly loan payments. The regulation will allow the education secretary to disqualify employers — not individuals — who engage in activities the department deems to have a “substantial illegal purpose,” such as assisting undocumented immigrants, providing gender transition care for minors or engaging in diversity, equity and inclusion.
Employees who work for a nonprofit that is removed from the program will still be required to make student loan payments, but the payments will not count toward loan forgiveness. The rule is slated to take effect July 1.
The revisions drew sharp criticism from liberal lawmakers and advocacy groups who accused the Trump administration of weaponizing and undermining a program Congress created in 2007 to encourage college graduates to enter fields that serve the public good.
A group of 22 state attorneys general argues that the Education Department lacks the legal authority to carve out exceptions based on ideology, noting that the agency’s definition of illegality aligns with President Donald Trump’s policy objectives. In their lawsuit, filed in U.S. District Court in Massachusetts, the group said the rule is “arbitrary and capricious,” as it grants the department unfettered power to target specific state policies or social programs.
“This administration has created a political loyalty test disguised as a regulation,” said New York Attorney General Letitia James, who is leading the coalition of state AGs. “It is unjust and unlawful to cut off loan forgiveness for hardworking Americans based on ideology.”
In a separate lawsuit filed Monday in U.S. District Court in Massachusetts, a coalition of more than a dozen nonprofits, cities and unions is also suing the Education Department on similar grounds as the states, claiming the agency is exceeding its authority with the new PSLF rule.
“It’s an illegal attack on those who placed their faith in PSLF’s bipartisan promise, only to see it cruelly ripped away,” said Randi Weingarten, president of the American Federation of Teachers, one of the parties in the lawsuit. “It will chill protected speech, drain talent from desperately needed jobs helping vulnerable communities, and saddle remaining workers with an insurmountable debt load.”
Both groups are asking the court to vacate the rule and bar the department from implementing it in July.
Under Secretary of Education Nicholas Kent countered the narrative that the Trump administration is imposing its political values on the loan forgiveness program. He said the Education Department will enforce the new PSLF rule neutrally, without consideration of the employer’s mission, ideology or the population they serve.
“It is unconscionable that the plaintiffs are standing up for criminal activity,” Kent said in a statement Monday. “This is a commonsense reform that will stop taxpayer dollars from subsidizing organizations involved in terrorism, child trafficking, and transgender procedures that are doing irreversible harm to children.”
Under the rule, employers would have the right to appeal if they are removed from the program. While payments a borrower makes on student loans after that person’s employer is kicked out of the program will not count toward forgiveness, the change does not disqualify student loan payments that a borrower has already made.
The Education Department has provided debt relief to more than 1 million student loan borrowers across more than 20 sectors of the economy through PSLF to date.
The new rule follows an executive order Trump signed in March to exclude organizations that he said support “illegal immigration, child trafficking, pervasive damage to public property and disruption of the public order.” The order focused on nonprofits that help transgender children, engage in public protests that include blocking highways or support groups that are designated as foreign terrorist organizations, such as Hamas.