Can the Trump administration still change PSLF? Appeals dropped, rule struck down: what it means for teachers, nurses and nonprofit workers

The Trump administration has given up its legal battle over changes to the Public Service Loan Forgiveness (PSLF) programme, a US scheme that wipes out student loans for people who work in public service. On Wednesday, the Department of Justice withdrew two appeals it had filed against court rulings from June. Each withdrawal was a single-sentence agreement between the two sides, saying each would bear its own legal costs. Federal officials gave no reason.

For the lakhs of Americans who work in schools, hospitals, government offices and charities; the old rules stay.

Why did Trump drop the PSLF legal fight? what the student loan forgiveness ruling means for public workers in 2026

Last October, the Education Department finalised a new rule. It would have allowed Education Secretary Linda McMahon to throw an employer out of PSLF if she decided its work had a “substantial illegal purpose.”


The rule’s list of covered activities included some immigration-related work, gender-affirming care, support for terrorism, alleged illegal discrimination, reproductive care for minors and protest-related conduct. It also named “aiding or abetting” violations of federal immigration law.

Critics said it was aimed at employers who help undocumented immigrants or transgender youth, such as schools, public hospitals and legal aid groups.

The rule was meant to start on 1 July. A day earlier, on 30 June, two federal judges struck it down in separate cases. Judge Myong Joun in Massachusetts said the department had gone beyond its powers and that the rule threatened free speech under the First Amendment.

Judge Amir Ali in Washington, D.C., also ruled against it, finding that it went beyond what the Higher Education Act allows.

Both judges “vacated” the rule, meaning they cancelled it completely instead of just pausing it. So the earlier eligibility rules never stopped applying. By withdrawing its appeals, the government has now left those rulings as they are.

Who this protects

The biggest gain is for borrowers whose employers might have been targeted. Under PSLF, a person who works in a qualifying public service job for 10 years and makes 120 monthly payments gets the rest of their federal student debt forgiven.

Under the rejected rule, an employer could have lost its eligibility, and that could have put years of a worker’s progress at risk. That risk is gone for now.

More than 1 million people have had their loans cancelled so far, including nonprofit workers, teachers, social workers, nurses and other public employees.

Dan Zibel of the group Student Defense called the administration’s attempt unlawful from the start and described the outcome as a big win for millions who chose public service careers.

The employers are protected too. The cases were brought by more than 20 states, along with nonprofit groups, unions and cities. The plaintiffs included 22 states and Washington, D.C. Their argument was that PSLF could turn into a tool for political punishment, with the government deciding which organisations deserve the benefit based on their views or the people they serve. The courts agreed, at least on the legal points before them.

Why the programme’s history makes this important

PSLF began in 2007 under President George W. Bush. For years, very few people actually got relief. By the time Joe Biden became president in 2021, only about 7,000 borrowers had received forgiveness, according to The Boston Globe.

The programme was widely criticised for rejecting many applicants. Biden’s administration brought in a temporary waiver that year to remove some of the hurdles.

Trump signed an executive order in March 2025 titled “Restoring Public Service Loan Forgiveness,” asking the Education Department to exclude organisations doing activities the administration considered illegal. The October rule was the result. So the programme has seen two very different pressures in a short time; one to make it easier to get relief, and another to limit who qualifies.