What Happened?

Two federal courts have blocked a rule that would have cut off student loan forgiveness for workers at certain employers, according to a Congressional Research Service report examining the legal conflict. Both courts struck down the rule on June 30, and the Education Department has appealed.

The blocked rule, issued Oct. 31, 2025, would have made workers ineligible for the Public Service Loan Forgiveness (PSLF) program if their employer was found to have a "substantial illegal purpose." That could include organizations the secretary determined were aiding immigration law violations, supporting terrorism, or carrying out a pattern of illegal discrimination.

Why Does it Matter to Me?

The PSLF program cancels remaining federal student loan debt for borrowers who make 120 qualifying monthly payments, roughly 10 years' worth, while working full-time for a government agency, nonprofit, school, or other qualifying public service employer. Through April, about 1.3 million borrowers had received forgiveness totaling $93.4 billion.

Because the courts vacated the rule, borrowers who work at employers that would have been disqualified under it continue to rack up qualifying payments as if the rule never existed. For now, the program runs under the same rules that have been in place for nearly 20 years.

Both Sides, Now

The administration's position traces to a March 2025 executive order directing the secretary to block forgiveness for workers at organizations with a "substantial illegal purpose." The rule that followed gave the secretary authority to remove an employer from the qualifying list based on conduct, such as helping people evade immigration law.

The courts disagreed. Judges in Massachusetts and Washington, D.C., found that Congress laid out exactly who qualifies under Section 455(m) of the Higher Education Act of 1965, listing 18 broad categories of public service jobs. Congress made only one express exception, removing members of Congress from qualifying government employment in a 2008 amendment. The courts ruled the secretary had no authority to "pick and choose" among employers within those categories based on her own assessment of their conduct, and vacated the rule under the Administrative Procedure Act, which governs how federal agencies write rules.

The Education Department filed appeals of both rulings on Aug. 27.

What Happens Next?

The appeals courts will now decide whether the lower court judges got it right. Until those courts rule, the PSLF program keeps operating under its pre-2025 framework. If the appeals courts side with the administration, the employer restrictions could take effect. If they uphold the lower courts, the rule stays blocked.

Congress also has the power to act. Lawmakers could write new legislation that either endorses the administration's approach, changes the PSLF eligibility rules in a different way, or bars the restrictions entirely. No such legislation has been scheduled for a vote.

---

Spot something wrong? Report an issue with this article