A coalition of 21 Democrat-led states and the District of Columbia is suing the U.S. Department of Education to block a new rule that would disqualify employers from a federal student debt relief program based on activities that have an "illegal purpose."
The lawsuit, filed on Monday in a Massachusetts federal court, centers on the department's
final rule that tightens eligibility criteria for employers participating in the Public Service Loan Forgiveness (PSLF) program. Since 2007, the taxpayer-funded program discharges the remaining federal student loan balance for borrowers who make 10 years of qualifying payments while working full time in public service, such as for government agencies or qualified nonprofit organizations.
Under the new rules
finalized last week, employers that otherwise meet the PSLF program's government or nonprofit requirements could be disqualified if the Education Department determines that they engage in activities that have a "substantial illegal purpose."
The department outlined examples of such disqualifying conduct, including violating federal anti-discrimination laws, aiding or abetting illegal immigration, supporting terrorism, trafficking children, or participating in violence during protests.
The rule also targets organizations engaged in "chemical and surgical castration or mutilation of children," which covers so-called "gender-affirming" surgeries that President Donald Trump has
described as sterilizing in nature, as well as using puberty blockers and sex hormones to change a child's physical appearance to align with a gender identity that differs from his or her sex.
The Education Department
said the new rules uphold the program's original purpose of supporting Americans who dedicate their careers to public service. But the suing states argued that the rule is politically motivated and is designed to punish employers whose missions the Trump administration does not favor.
In their
complaint, the states accuse the administration of trying to "chill the activities of public service employers by discouraging their employees from what it deems objectionable forms of public service."
"The only forms of illegality named are a cherry picked list of this administration's most disfavored groups and activities, including support for immigrants, gender-affirming care, diversity equity and inclusion initiatives, and political protest," the complaint reads. "In seeking to crack down on specific activities disfavored by this administration, the true intent behind the rule is clear."
The lawsuit is led by the attorney general of New York state and joined by those of Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Washington, Wisconsin, and the District of Columbia.
A
separate lawsuit challenging the new PSLF rule was filed the same day in the same Massachusetts court by the National Council of Nonprofits. It was joined by the cities of Albuquerque, New Mexico; Boston, Chicago, and San Francisco, as well as the American Federation of Teachers and the National Education Association—the nation's two largest teachers' unions—along with several other local governments and advocacy groups.
The Department of Education defended the rule and said it would apply it in a neutral manner.
"It is unconscionable that the plaintiffs are standing up for criminal activity," Under Secretary of Education Nicholas Kent said in a statement to the Epoch Times.
"This is a commonsense reform that will stop taxpayer dollars from subsidizing organizations involved in terrorism, child trafficking, and transgender procedures that are doing irreversible harm to children.
"The final rule is crystal clear: the Department will enforce it neutrally, without consideration of the employer's mission, ideology, or the population they serve."
The final rule builds on Trump's March 6 executive order that
states that the PSLF program had "misdirected tax dollars into activist organizations." The rule directs Secretary of Education Linda McMahon to revise the program to bar borrowers from debt relief if they work for organizations that "have a substantial illegal purpose."
That presidential order also took issue with the program for granting loan cancellations before borrowers completed the full statutory number of qualifying payments. In 2022, during the COVID-19 pandemic, the Biden administration temporarily relaxed PSLF requirements to expand eligibility and later made many of those changes permanent. As a result, more than 1 million borrowers have had their federal student loans wiped out through the program.
The final rule is set to take effect on July 1, 2026.
