Trump’s restrictions on the student loan forgiveness program have been blocked

Student borrowers don’t have to worry about losing eligibility for Public Service Loan Forgiveness based on their employer, after two federal judges blocked the Trump administration’s rule.

On Tuesday, US District Judge Amir Ali struck down the regulation adding new restrictions to the PSLF, which was set to begin on July 1. That same day, US District Judge Myong Joun sided with states, cities and nonprofits that brought legal challenges against the policy, concluding that the law is “unlawful” and “violates the First Amendment.”

The Trump administration’s rule would have changed the definition of “eligible employer” under the PSLF to exclude organizations that “engage in illegal activities.”

The PSLF, signed into law in 2007 by George W. Bush, provides debt forgiveness after ten years to borrowers who work for nonprofits and the government.

More than 9 million borrowers may qualify for PSLF, according to a 2022 estimate from Protect Borrowers, a nonprofit organization.

“This decision marks an important victory for public servants and the law,” said Jaylon Herbin, director of federal campaigns at the Center for Responsible Lending.

“Congress has made it clear who qualifies for federal employee compensation, and the Department of Education cannot rewrite that law by creating new eligibility criteria that Congress never authorized,” Herbin said.

Here’s what borrowers in the program need to know.

New York Attorney General Letitia James and more than a dozen other state attorneys general sued the administration in November over its new PSLF law. A coalition of cities across the US, labor unions and nonprofits also filed a lawsuit that month against loan forgiveness restrictions.

“Public Employee Loan Forgiveness was created as a promise to teachers, nurses, firefighters and social workers that their work in our communities will be respected,” James said in a statement at the time.

“Instead, this administration has created a political loyalty test disguised as a law,” James said.

But critics argue that the vague regulatory language would have given Trump officials broad authority to pull out any programs they don’t like. Trump’s executive orders target immigrants, transgender and non-binary people and those working to increase diversity in the private and public sectors. Many non-profits work in these areas, providing legal support or doing advocacy and education work.

Opponents of the policy also said Trump officials failed to review the fact that Congress specified that PSLF would be available to any eligible borrower who works for the government or a 501(c)(3) nonprofit organization.

“If Congress wishes to give borrowers credit for loan payments made while working only in certain organizations of section 501 (c) (3) or wishes to transfer to the Secretary the authority to make these decisions, they know how to do that,” Ali wrote in his decision.

“Yet the Congress chose not to give petitions or delegations when it defined ‘public service’,” Ali said.

The US Department of Education is “considering next steps,” said Under Secretary of Education Nicholas Kent.

“The Public Service Loan Forgiveness Program is intended to support Americans who serve the public, not to support organizations involved in terrorism, helping illegal immigrants, or supporting child mutilation,” said Kent.

Thanks to these two court orders, “borrowers don’t have to worry about losing their PSLF eligibility based on their employment,” said higher education expert Mark Kantrowitz.

Otherwise, there are generally three requirements to qualify for PSLF: Your employer must be a government organization at any level, a 501(c)(3) nonprofit organization or another type of nonprofit organization that provides public services; your loan must be a direct federal loan; Also, you need to make 120 qualifying payments on an income-driven payment plan.

The best way to find out if your employer qualifies for PSLF is to complete what is called an employer certification form. Try to fill out this form at least once a year and keep records of your eligible certified payments, Kantrowitz says.