Two lawsuits led by Democrat-ruled states were filed on Monday against the Trump administration over a new Education Department regulation that narrows which employers qualify for the Public Service Loan Forgiveness program, with plaintiffs arguing the policy violates free-speech protections and weaponizes student-debt relief against the president's political opponents.
Rule Tightens PSLF Eligibility, Citing Illegal Purpose
As revealed in a report by the Associated Press, advocates say the language is vague and ideologically targeted. They contend the regulation is designed to disqualify organizations that serve specific groups of the population that are frequently at odds with the Trump administration.
The challenged regulation, which was revealed last Thursday, revises PSLF eligibility to exclude government or nonprofit employers deemed to have a "substantial illegal purpose," citing examples such as supporting terrorism and aiding child trafficking. The department framed the change as a guardrail to prevent taxpayer subsidies from flowing to unlawful activity.
Nonprofits, States Say Changes Violate Federal Law
One suit, led by the National Council of Nonprofits and joined by Democrat-led cities, labor unions and charities, argues the regulation conflicts with the Higher Education Act, which makes government and 501(c)(3) employers PSLF-eligible. It is worth noting that 501(c)(3) nonprofits are business entities recognized by the Internal Revenue Service (IRS) as being exempt from federal income tax because it is organized and operated exclusively for specific public-benefit purposes.
A second complaint from a 22-state coalition of Blue states, including Massachusetts and New York, raises similar claims. Both cases were filed in the U.S. District Court for the District of Massachusetts and ask a judge to block enforcement.
Plaintiffs say the rule gives administrations wide legal leeway to deem disfavored missions "illegal," chilling advocacy and destabilizing public-service recruitment.
Education Department Defends Enforcement
Education Undersecretary Nicholas Kent, in a statement shared with Politico, rejected that characterization, saying the department will enforce the regulation "neutrally," regardless of an employer's mission or clientele. He called the policy a "commonsense reform" to ensure PSLF does not subsidize criminal conduct.
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