Trump Administration drops PSLF appeal: What it means for student loan forgiveness rules

Public service workers can continue pursuing federal student loan forgiveness without the additional restrictions proposed under a Trump administration overhaul. The administration has dropped its appeal of a court ruling that struck down the changes. Leaving the existing Public Service Loan Forgiveness (PSLF) rules in place.

In a filing on Wednesday, the administration said it was withdrawing its appeal of a June 30 federal court ruling that found the overhaul unlawful. It did not explain its decision.

The move ends the administration's appeal and removes the immediate threat posed by the proposed restrictions. For eligible borrowers working in public service, it means their access to loan forgiveness will not be restricted under the overturned rule because of the activities of their employers.

PSLF Rules Stay in Place After Trump Administration Drops Appeal

PSLF lets eligible borrowers to have their remaining federal student loan debt canceled after making 120 qualifying monthly payments which is equivalent to 10 years of payments.

It covers employees of government agencies, public schools, fire, police departments, public hospitals & nonprofits. It offers a path to student debt relief for people who dedicate their careers to public service.

Almost 720,000 federal student loans were discharged through the program between 2018 and mid-2025, according to the Education Data Initiative.

With the administration withdrawing its appeal, the court order overturning the revised rule remains in place. Borrowers must still meet the existing eligibility requirements, including the qualifying payment requirement, but the additional restrictions contained in the overturned rule will not take effect.

What the Trump Administration Wanted to Change

The administration proposed changes to PSLF in August 2025, arguing that the program should support public servants rather than organizations engaged in illegal activities.

The rule sought to disqualify borrowers if their employers had what it described as a “substantial illegal purpose.” The listed activities included violating immigration laws, terrorism, trafficking, violations of state laws and violence intended to obstruct or influence federal government policy.

The proposal also covered organizations involved in what the rule described as the “chemical and surgical castration or mutilation of children.”

The Department of Education finalized the rule in October 2025. Had the restrictions taken effect, employees of affected organizations could have lost access to loan forgiveness because of their employers' activities, even if they personally performed public service work.

Why Nonprofits and Cities Challenged the New Rules

Several nonprofit organizations and municipalities challenged the rule, arguing that it gave the Education Department excessive discretion to decide whether an organization was engaged in a substantial illegal purpose, as per a CBS News report.

The challengers included Public Citizen Litigation Group and Student Defense, which brought a case on behalf of the Robert & Ethel Kennedy Human Rights Center and the American Immigration Council. Albuquerque, Boston and Chicago were also among the cities involved in the legal challenges.

On June 30, U.S. District Judge Myong Joun in Massachusetts vacated the rule, finding that the Education Department had exceeded its authority and that the changes threatened First Amendment protections for free speech. On the same day, District Judge Amir Ali in Washington issued a similar ruling in a separate case brought by nonprofit organizations.

The administration's decision to withdraw its appeal leaves the order vacating the rule in place, preventing the overturned restrictions from taking effect.

What the Decision Means for Student Loan Borrowers

For public service workers pursuing loan forgiveness, the decision removes uncertainty over the additional restrictions proposed by the administration. Employees of eligible nonprofits and government organizations will not be subject to the extra eligibility limits contained in the overturned rule.

Diane Yentel, CEO of the National Council of Nonprofits, said, "With the appeal dismissed, the court's order vacating the rule stands, and PLSF remains as Congress designed it," adding, "This outcome gives nonprofit employees the certainty that the loan relief they've earned through years of public service will be there for them, so they can keep doing the work that strengthens the communities they serve," as quoted by CBS News.