US Education Department faces lawsuits over student loan limits

By Al Mayadeen English
Source: News websites
Today 08:52

States and nonprofit groups accuse the Trump administration of politicizing the Public Service Loan Forgiveness program by excluding certain employers based on ideology.

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New York Attorney General, Letitia James, speaks after pleading not guilty outside the United States District Court, on October 24, 2025, in Norfolk (AP)

The United States Department of Education is facing a wave of lawsuits from state attorneys general and public-interest organizations over a new rule that restricts eligibility for student loan forgiveness under the federal Public Service Loan Forgiveness (PSLF) program.

Announced last week and set to take effect on July 1, 2026, the regulation empowers the Department to disqualify entire employers from PSLF if they are deemed to have a “substantial illegal purpose.”

Plaintiffs argue the measure represents a sweeping and politically driven overhaul of the 2007 law, which was designed to encourage service in public and nonprofit sectors by erasing federal student debt after ten years of qualifying payments.

Ideological targeting

The lawsuits, filed on Monday in federal courts by a coalition of 21 state attorneys general led by New York’s Letitia James and by a consortium of nonprofits, unions, and local governments, accuse the Education Department of exceeding its authority and weaponizing the loan program against disfavored groups.

According to court filings, the new rule could make employees at organizations that provide services related to immigration, diversity programs, or gender-affirming medical care ineligible for debt relief, even if their work fully complies with the law.

“The Department of Education’s new rule is an attack on our nation’s teachers, nurses, and public servants who have dedicated their lives to helping others,” James said in a statement announcing the lawsuit.

“This administration is weaponizing the Public Service Loan Forgiveness program to punish organizations it disagrees with, breaking the promise made to millions of Americans who serve their communities,” she added.

Education Department defends the rule

The department has defended the policy as a “commonsense reform” to ensure taxpayer funds are not subsidizing groups engaged in criminal or extremist activity.

Additionally, the department said that the rule will be applied neutrally, regardless of an organization’s ideology or who it serves.

The rule’s vague language could allow the administration to disqualify employers based on political or cultural views rather than actual violations of American law, undermining trust in a program already plagued by bureaucratic hurdles. The uncertainty could discourage workers from entering or remaining in public service jobs if they fear their employers might later lose eligibility.

If upheld, the rule could mark one of the most significant rollbacks of student loan forgiveness in years, limiting relief for thousands of Americans.

The lawsuits seek to block implementation of the rule, arguing it violates both the Administrative Procedure Act and the First Amendment. Legal experts expect the case could ultimately reach the Supreme Court.