Public service loan forgiveness rule targets groups frowned on by Trump administration, suit alleges
A lawsuit states that the federal Department of Education's new restrictions on public service loan forgiveness eligibility are "aimed only at chilling activities that are disfavored" by the Trump administration. Credit: AP / Seth Wenig
New York Attorney General Letitia James on Monday joined the attorneys general of 20 other states and Washington, D.C., in a lawsuit accusing the Trump administration of playing politics with a popular student loan forgiveness program.
The lawsuit against the federal Department of Education and its secretary, Linda McMahon, states that the agency’s new restrictions on public service loan forgiveness eligibility are illegal and "aimed only at chilling activities that are disfavored" by the Trump administration, including support for immigrants, gender-affirming care, diversity initiatives and political protest.
The federal agency announced last week that the program would not forgive the loans of borrowers working for employers that engage in "substantial illegal purpose," according to the new rule, published on Friday. The rule will go into effect July 1, 2026.
The complaint filed in federal court in Massachusetts on Monday argues that the term "substantial illegal purpose" is a cover for the Department of Education to serve as a "roving enforcer" for the Trump administration, punishing activities it doesn't favor.
In a statement released by the Department of Education in response to the lawsuit, Under Secretary of Education Nicholas Kent called the new rule "common sense reform" to protect taxpayer funds and said it was "unconscionable that the plaintiffs are standing up for criminal activity."
The Public Service Loan Forgiveness program has forgiven more than $85 billion in loans for more than 1 million public service workers, including police officers, teachers and nurses, according to the lawsuit. The program, launched in 2007 under President George W. Bush, forgives borrowers’ federal loans after 10 years of qualifying payments.
The new rule "leads to a lot of uncertainty" about whether students will be able to get their loans forgiven, said Nicholas Prewett, executive director of financial aid and scholarship services at Stony Brook University
"It used to be clear what roles were eligible" for public service forgiveness, he said.
But now, he said, if a university has programs that foster diversity or if a nonprofit serves a large immigrant population, it is not clear whether the organization might one day be removed from the program. The result could be that its employees with federal student loans might lose their eligibility for forgiveness after spending years making payments.
"It just makes it really challenging for students and for administrators and for everybody," he said.
Correction: The Public Service Loan Forgiveness program has forgiven more than $85 billion in loans for more than 1 million public service workers. A previous version of this story had an incorrect amount.
Maura McDermott covers education. Since joining Newsday in 2012, she also has worked on the investigations team and covered real estate and the business of health care.
