Cities sue over Trump’s new Public Service Loan Forgiveness rule : NPR

The Public Service Loan Forgiveness Program was created by Congress in 2007 to forgive federal student loan debts for borrowers who spend a decade working in public service.

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The cities of Albuquerque, New Mexico, Boston, Chicago and San Francisco are suing the Trump administration over changes it plans to make to the popular Public Service Loan Forgiveness program, or PSLF.

The lawsuit, which also involves the nation’s two largest teachers unions and the American Federation of State, County and Municipal Employees, comes less than a week after the U.S. Department of Education issued a rule change regarding PSLF.

Beginning July 1, 2026, the department says the change will allow it to deny loan forgiveness to workers whose government or nonprofit employers engage in activities with a “substantial unlawful purpose.” The task of defining “significant unlawful purpose” will not fall to the courts but to the Secretary of Education.

PSLF was created by Congress in 2007 and signed by then-President George W. Bush to forgive federal student loan debts for borrowers who spend a decade working in public service, including teaching, nursing and policing.

According to the complaint filed Monday in the U.S. District Court for the District of Massachusetts, the plaintiffs fear that a city or county government’s resistance to the administration’s actions on immigration, for example, or anti-DEI policies, could lead the secretary of state to exclude that government’s officials from loan forgiveness. They fear a local nurse or first responder might be denied loan forgiveness because their local leaders defied the Trump administration.

The complaint contends that the rule is “an attempt to target organizations and jurisdictions whose missions and policies do not align with the [the Trump administration’s] political positions on immigration, race, gender, free speech and public protest.

“Politically motivated retaliation, like what the administration has done here, should have no place in America,” said Skye Perryman, president and CEO of Democracy Forward, one of the organizations representing the plaintiffs.

The group of plaintiffs also includes the National Council of Nonprofits, which said in a statement when the rule was issued:

“Nonprofit organizations operate food banks, serve veterans, help survivors of domestic violence, deliver meals to seniors, respond to disasters and much more. Nonprofits must be able to identify and respond to these needs without political interference, fear of retaliation, or exclusion from a program designed to support their employees.

The Department of Education has not yet responded to NPR’s request for comment on the lawsuit. However, he forcefully defended the rule change in his responses to public comments submitted during review of the proposed rule.

“This rule provides strong, clear standards rooted in law, not ideology,” the Department of Education wrote in response to concerns that different administrations may apply this new legality standard differently.

“Taxpayer funds should never directly or indirectly subsidize illegal activities,” Undersecretary of Education Nicholas Kent said in a statement when the rule was released. “The Public Service Loan Forgiveness program was intended to support Americans who devote their careers to public service – not to subsidize organizations that violate the law.”

The complaint argues that PSLF allowed many local governments to retain employees, including lawyers and engineers, who could earn more in the private sector. Albuquerque leaders say losing access to PSLF “would likely create an untenable staffing crisis.”

In a statement, Boston Mayor Michelle Wu added: “The city is partnering with cities, unions and nonprofits across the country to protect a program that helps Boston’s workforce and millions of Americans in public service pay for college. »

What activities does the administration consider illegal?

A key question raised by this rule change and the lawsuit is: How will the Department of Education define activities with a “significant unlawful purpose”?

Depending on the rule itself, these activities could include:

• “aiding and abetting violations of federal immigration laws”
• “supporting terrorism or engaging in violence with the intent to obstruct or influence the policy of the federal government”
• “engaging in the chemical and surgical castration or mutilation of children in violation of federal or state law”
• “engaging in the trafficking of children to another state for the purpose of emancipation from their lawful parents, in violation of federal or state law”
• “engage in a system of aiding and abetting unlawful discrimination”
• “and engage in a pattern of violating state laws.”

If the Secretary determines that an employer has behaved for a “significant unlawful purpose,” according to the rule, the employer can either engage with the department and agree to a corrective action plan or risk losing access to PSLF for its employees for 10 years.

In response to public comments, the Ministry of Education stated: “[it] would have no reason to strip eligibility of nonprofits engaged in work related to immigrant communities, LGBTQ+ individuals, or racial justice if those organizations follow the law.

But the plaintiff cities, which are on the U.S. Justice Department’s list of “sanctuary jurisdictions,” say the Trump administration has already accused them of obstructing federal law enforcement, and that this rule “represents a new attack on politically disadvantaged local governments and nonprofits whose local laws, policies and missions are anathema to the administration.”

“These cities’ actions are legal,” says Persis Yu of Protect Borrowers, another organization representing the plaintiffs. Furthermore, she adds, “whether these activities are legal or not is not a question of [determination] that the Secretary of Education has the right or expertise to do so.

The new rule is the culmination of a presidential action, issued in March, in which President Trump accused the Biden administration of abusing PSLF and said the program “has diverted taxpayer dollars to activist organizations that not only fail to serve the public interest, but actually harm our national security and American values, sometimes through criminal means.”

What was Congress’s intention in creating the PSLF?

The plaintiffs argue that Congress was clear about what should be considered a “public service” when it wrote the law, and that this new rule goes against lawmakers’ intent.

“The Higher Education Act defines public service employment to include government or a 501(c)(3) tax-exempt nonprofit organization. It provides no discretion or wiggle room within that definition,” Yu said. “Congress has said it is up to Congress to decide who is eligible for public service loan forgiveness. The secretary has no authority to change that.”

In response to public comments, the Department of Education disagreed, writing that “[it] rejects the idea that this rule exceeds its legal authority. THE [Higher Education Act] grants the Secretary explicit authority to regulate title IV programs. PSLF is a Title IV program, and its proper administration requires clear and enforceable standards. »

Another lawsuit was filed in tandem Monday, by a coalition of 21 state attorneys general, arguing on behalf of Democratic-leaning state governments who fear their public employees may also be denied loan forgiveness because of state leaders’ decisions to support immigrants, promote DEI or provide gender-affirming care.

The coalition of attorneys general warned in a press release that the rule would lead to “widespread confusion, fear, and instability among the public workforce, forcing states to face severe staffing shortages, higher turnover, and skyrocketing costs to maintain essential services.”

According to federal data, more than 1.1 million public employees have so far had their federal student loan debts forgiven under PSLF.