4 Takeaways as Courts Strike Down New PSLF Rules

Two federal courts ruled against the Education Department this week and struck down controversial new regulations that could have limited student loan forgiveness under the Public Service Loan Forgiveness (PSLF) program.The rules, which were set to go into effect on July 1, 2026, have now been vacated.“This was a simple but powerful case with serious implications for working people across the country,” said Protect Borrowers, one of the organizations that had challenged the proposed regulations, in a statement on Tuesday, June 30, 2026.  The new PSLF regulations, had they been enacted, would have given the Secretary of Education the power to disqualify organizations from continued PSLF eligibility if, in the Secretary’s determination, the organization was engaged in activities that had a “substantial illegal purpose.” The rules defined “substantial illegal purpose” to mean any of several enumerated activities related to immigration enforcement, discrimination, health care for transgender youth, and public protest.  Critics filed multiple legal challenges, arguing that the department’s PSLF rule was unlawful.Congress never authorized such a system in which otherwise-qualifying nonprofit or government employers could be unilaterally cut off from student loan forgiveness under the program, they contended.

The challengers, which included a diverse group of nonprofit organizations and state and local government bodies, also argued that the rules violated constitutionally protected speech and assembly rights and were largely a pretext to target groups that the current administration simply disfavors.The Education Department countered that the PSLF rule was lawful and would help ensure the integrity of the program so that the government isn’t subsidizing illegal activities through student loan forgiveness.Here’s what the recent PSLF rulings mean for borrowers pursuing student loan forgiveness, and what comes next.Courts rule PSLF restrictions are unlawful Two separate federal courts on Tuesday ruled that the Education Department’s new rules that could have limited student loan forgiveness under PSLF were unlawful, just hours before they were scheduled to take effect.

“Congress unequivocally prescribed the requirements for PSLF-eligible public service jobs.The statute does not vest any discretionary authority in the Secretary to disqualify employers (and consequently borrowers) or to alter unambiguous requirements set forth in… the repayment provision or the statutory definition of ‘public service jobs,’” wrote the U.S.District Court for the District of Massachusetts in its decision.“Consequently, the Final Rule is unlawful because it permits the Secretary to disqualify statutorily eligible employers upon determining that they have a ‘substantial illegal purpose.’ The Final Rule plainly contradicts the unambiguous text of the PSLF Statute and exceeds the scope of the Department’s authority because Congress does not require such a hurdle and did not specifically instruct the Department to impose it.” “Nothing in the language of the statute ‘qualifies or restricts’ which section 501(c)(3) organizations are eligible to participate in the PSLF program,” wrote the U.S.

District Court for the District of Columbia in its ruling issued on the same day.“The statute’s use of the word ‘shall’ indicates a mandatory directive to the Secretary to give credit to borrowers for loan payments made while they work full-time at a section 501(c)(3) organization.” Victory for student loan borrowers pursuing PSLF Student loan borrower advocacy groups and the many organizations that had sued the Education Department to stop the PSLF rules from going into effect hailed the dual court decisions as unequivocal victories for borrowers pursuing student loan forgiveness.“The court’s ruling is a major victory for those who work in the public interest and the communities they serve.People who devote their careers to public service and non-profit work deserve access to loan forgiveness on the terms Congress promised, without the threat of retribution from the Trump administration,” said Cormac Early, attorney at Public Citizen Litigation Group and lead counsel on one of the main legal challenges.

“This decision is a win for the communities that depend on local nonprofits and for the workers who serve them,” said Diane Yentel, President and CEO of the National Council of Nonprofits, one of the lead plaintiffs.“By protecting a proven, bipartisan program, we're ensuring that dedicated nonprofit employees can keep the benefits they've earned and continue doing the work that matters.” “​The ruling is a win for access to justice, safeguarding the talent pipeline for public interest attorneys who represent the nation's most vulnerable,” said the American Bar Association in a statement.“Without PSLF, the average debt incurred prevents new graduates from accepting and remaining in lower paying positions in under-resourced communities.Legal aid lawyers, public defenders, district attorneys, domestic violence representation, veterans benefit advocates and the work they do are strengthened by the program.” Student loan forgiveness under PSLF continues Both federal district courts vacated the Education Department’s rule that would have given the Secretary of Education the authority to disqualify otherwise-eligible employers from participating in the PSLF program and to allow employees to qualify for student loan forgiveness.

That means the rules are not just blocked; they have been overturned on a nationwide basis.“Because the rule was vacated on June 30, it will not take effect for anyone, anywhere,” said Protect Borrowers in its statement.The Education Department put up a banner message on its website shortly after the rulings were issued, notifying student loan borrowers and PSLF employers that a proposed new PSLF employment certification form, which would have required employers to certify under penalties of perjury that they were not engaged in activities that had a “substantial illegal purpose,” would be revamped to reflect the new court decisions.In the meantime, borrowers and employers can use the older version of the PSLF employment certification form, which had no such requirement.

“Due to a court order, the U.S.Department of Education can’t enforce certain changes to the PSLF Program previously scheduled to take effect July 1, 2026,” reads the banner message on StudentAid.gov.“Until we update the PSLF Form, employers may use the current version to certify a borrower’s employment.Language regarding an employer’s certification that it has not engaged in illegal activities will have no effect.” Education Department could appeal the PSLF rulings While the two court decisions were clear victories for student loan borrowers, the legal battle may not necessarily be over.

The Education Department retains the ability to appeal the rulings to federal circuit courts and may decide to do so.That could potentially leave at least some amount of uncertainty on the table as these potential appeals play out.But for now, one thing is clear: borrowers who are pursuing student loan forgiveness under PSLF can breathe a little easier, and the program remains very much intact.