DOJ Drops Fight to Restrict Public Service Loan Forgiveness, Borrowers Keep Current Rules
On Wednesday, October 21, 2026, the Trump administration moved to end its legal fight to overhaul the Public Service Loan Forgiveness (PSLF) program, with the Department of Justice dropping two appeals in single-sentence joint agreements under which each side pays its own fees. The Education Department's planned July 1 restrictions—excluding employers that did not fit the administration's definition of "public service"—will not take effect, and PSLF remains unchanged.
The Justice Department appealed after federal judges ruled in June for advocates who said PSLF risked becoming a tool for political retribution. But it dropped both appeals Wednesday in brief joint agreements stipulating that each side would pay its own legal fees. The department had sought to implement the changes on July 1; federal courts blocked them just before that date.
On June 30, 2026—one day before the rule would have taken effect—U.S. District Judge Myong Joun in Massachusetts vacated the Education Department's changes, holding they overstepped the agency's power and threatened First Amendment free-speech protections. Joun found the rule contrary to law, beyond the Secretary's statutory authority, arbitrary and capricious, and a First Amendment violation. The same day, District Judge Amir Ali in Washington issued a similar ruling in a case brought by nonprofit organizations. The rulings came in response to a pair of lawsuits filed by more than 20 states plus a coalition of nonprofit groups and cities. According to press reports, challengers attracted more than 100 supporting briefs while the government attracted none.
PSLF forgives student debt for government and nonprofit workers after 10 years of qualifying service; more than 1 million Americans have had loans canceled through the program. The now-abandoned plan would have let Education Secretary Linda McMahon disqualify employers she found had a "substantial illegal purpose," a vaguely phrased rule aimed at organizations supporting transgender youth or undocumented immigrants, potentially affecting borrowers at schools, public hospitals, and legal aid groups. Dan Zibel, an attorney for Student Defense, called the outcome "a significant victory for millions of Americans who have dedicated their careers to public service." With the appeals withdrawn, borrowers continue under existing eligibility rules.
With the Justice Department abandoning its appeals, the district court rulings stand and the restrictive rule has no remaining judicial path to revival. Borrowers and employers proceed under the existing PSLF standard; any future change would require new legislation or rulemaking and would face fresh judicial review.