Two lawsuits challenge new DOE rule limiting student loan forgiveness for nonprofits: What you need to know about eligibility cuts

Two lawsuits have been filed challenging the Trump administration’s new Department of Education (DOE) rule that limits Public Service Loan Forgiveness (PSLF) for nonprofit and government employees.

The suits, filed in Massachusetts federal court, aim to preserve the programme’s existing scope, which allows federal student loans to be forgiven after ten years of qualifying public service and monthly payments. The rule, finalised last week, restricts the types of employers and fields eligible for PSLF. Critics warn it could penalise organisations and agencies whose policies conflict with the administration’s agenda, as reported by the NY Times.Legal challenges target DOE rule A coalition of nonprofits and city and county governments, including teachers’ unions and legal aid groups, filed one lawsuit. A separate case was brought by 21 state attorneys general and the District of Columbia. Both argue the rule exceeds the DOE’s authority and violates the Administrative Procedure Act, NY Times reported. Under the new rule, employers engaging in unlawful activities, such as supporting terrorism or aiding illegal immigration, could render employees ineligible for PSLF.

Critics have said this provision may also affect nonprofits providing gender-affirming care for children, diversity initiatives, or services to undocumented immigrants, as quoted by the NY Times.Cities and states raise concerns Chicago, often criticised by President Trump, warned it could face penalties due to its listing on the Justice Department’s sanctuary cities registry. Albuquerque, Boston, and San Francisco are also plaintiffs, NY Times reported.

The states’ lawsuit argued the rule “empowers the Department of Education to serve as a roving enforcer of the administration’s animus,” as quoted by the NY Times.DOE response to lawsuits Nicholas Kent, under secretary of education, defended the rule in conversation with the NY Times. He said it “is a common-sense reform that will stop taxpayer dollars from subsidising organisations involved in terrorism, child trafficking and transgender procedures that are doing irreversible harm to children.” Both lawsuits claim the rule could unfairly strip loan forgiveness from workers whose employers are disliked by the administration. Legal experts say the cases could clarify the DOE’s authority over PSLF and the protections available for public servants and nonprofit employees.Impact on public service employees If upheld, the rule could exclude numerous nonprofit and government workers from PSLF eligibility, potentially affecting tens of thousands of borrowers. The outcome will determine the future scope of federal student loan forgiveness and set a precedent for administrative control over public service programmes.