Why It Matters

Federal courts have blocked the Trump administration's effort to restrict student loan forgiveness based on employer conduct, according to a new Congressional Research Service (CRS) report examining the legal conflict.

On June 30, both district courts vacated the October 2025 Public Service Loan Forgiveness rule, finding it conflicted with the plain text of HEA Section 455(m). The courts found the education secretary lacked statutory authority to impose such restrictions on the Public Service Loan Forgiveness (PSLF) program, which has operated for nearly 20 years.

Through April, the program had provided forgiveness to approximately 1.254 million borrowers, totaling $93.4 billion in student loan debt. The Trump administration is now appealing both decisions.

The Big Picture

The conflict stems from a March 2025 executive order directing the Secretary to ensure that individuals employed by organizations with a "substantial illegal purpose" would not be eligible for loan forgiveness.

Secretary of Education Linda McMahon issued a final rule on October 31, 2025, adding a "substantial illegal purpose" criterion to PSLF eligibility, under which an employer would be denied "qualifying employer" status if the Secretary found it engaged in activities such as aiding or abetting violations of federal immigration law, supporting terrorism, or carrying out a pattern of illegal discrimination.

Two sets of plaintiffs challenged the rule in district courts in Massachusetts and Washington, D.C. Section 455(m) of the Higher Education Act of 1965 requires the secretary to forgive loans when a borrower meets defined criteria: 120 qualifying monthly payments under a qualifying repayment plan while employed in a public service job.

Congress defined "public service job" across 18 broad categories, including nonprofit 501(c)(3) organizations, government agencies, law enforcement, and public education. The judges held that Congress made only one express exception, removing members of Congress from qualifying government employment in a 2008 amendment.

The courts rejected the education secretary's argument that she could narrow the employer pool based on conduct. They found that the secretary had no authority to "pick and choose" among qualifying employers within statutory categories based on her assessment of employer conduct. Under the Administrative Procedure Act, the courts vacated the rule as exceeding statutory jurisdiction and authority.

The Bottom Line

The Secretary appealed both district court judgments on August 27, and those appeals remain pending. Until resolved, the PSLF program continues operating under its pre-2025 framework, and borrowers employed by organizations that would have been affected by the vacated rule continue accumulating qualifying payments. Congress has the ultimate authority under the Property Clause of the U.S. Constitution to either endorse, modify, or prohibit the Trump administration's approach to PSLF.

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