Court Strikes Down DOE's Restrictive PSLF Eligibility Rule
Massachusetts court vacated DOE's new PSLF employer eligibility restrictions.
Why it matters: The ruling reaffirms broad access to PSLF, impacting thousands of borrowers working in public service. Legal teams advising loan servicers and employers must revisit compliance and program guidelines to align with this decision.
- June 30, 2026: U.S. District Court for Massachusetts invalidates DOE's PSLF rule hours before its July 1 effective date.
- October 31, 2025: DOE finalized rule restricting employers with 'substantial illegal purpose' from PSLF eligibility.
- 22 states plus DC sued DOE, citing statutory overreach and First Amendment violations.
- Judge Joun ruled the DOE rule was 'arbitrary and capricious' and violated protected speech rights.
On June 30, 2026, Judge Myong J. Joun of the U.S. District Court for the District of Massachusetts vacated the Department of Education's final rule that narrowed Public Service Loan Forgiveness (PSLF) employer eligibility, just hours before the rule was to take effect on July 1. The DOE's October 31, 2025 rule sought to exclude certain employers from PSLF coverage if their activities had a 'substantial illegal purpose,' targeting organizations involved in immigration support, gender-affirming care, and diversity initiatives. According to NASFAA, this was intended to restrict loan forgiveness to employees of more narrowly defined public service employers.
However, a coalition of 22 states, along with the District of Columbia, filed a lawsuit in November 2025, arguing the DOE exceeded its statutory authority and violated the First Amendment by chilling protected speech. The court agreed, ruling that the DOE's rule was 'arbitrary and capricious' and beyond what the Department was authorized to do. Public Citizen called the ruling a major victory for public interest employees. Attorney General Andrea Campbell of Massachusetts criticized the rule as political overreach that punished essential public service workers.
Established in 2007, the PSLF program enables borrowers who make 120 qualifying payments while working full-time for eligible public service employers to have their federal student loans forgiven. This ruling preserves broader access to the program, maintaining support for individuals in fields critical to community welfare. Legal advisors working with employers and loan servicers should reassess eligibility impacts and adjust counsel accordingly. The Department of Education has not disclosed whether it will appeal the ruling.
By the numbers:
- June 30, 2026 — Date the federal court vacated the DOE's PSLF final rule.
- October 31, 2025 — Date the DOE finalized its restrictive PSLF employer eligibility rule.
- 22 states and DC — Plaintiffs challenging the DOE's rule in court.
What's next: It remains unclear if the Department of Education will appeal the court decision or propose alternative eligibility criteria for the PSLF program.