Justice Department Drops Two Appeals Over PSLF Employer Rule

Lyndon Baines Johnson Department of Education Building in Washington, D.C., photographed in February 2025; a file photo, not a scene from the litigation. — G. Edward Johnson / Wikimedia Commons (CC BY 4.0)

Summary

DOJ joined plaintiffs on October 21 in dismissing two appeals over a rule restricting which employers count for Public Service Loan Forgiveness.
A Massachusetts judge had vacated the rule before its planned July 1 effective date, finding it beyond statutory authority, arbitrary and capricious, and in violation of the First Amendment.
The existing employer standards remain in effect, but a separate appeal in a case brought by 22 states is still pending.

Two appeals withdrawn

The Justice Department has agreed to dismiss two appeals defending a Trump administration change to Public Service Loan Forgiveness, the federal program known as PSLF. In an October 21 joint stipulation in the First Circuit, government and nonprofit plaintiffs asked to dismiss one appeal, with each side bearing its own fees and costs. The Associated Press reported a second joint dismissal in a related case. The filings end those appellate challenges; they are not a new court ruling approving loan forgiveness for any individual borrower.^{[1] [3]}

The Education Department's October 2025 rule would have let the secretary exclude an otherwise qualifying government or nonprofit employer if the department determined that its activities had a 'substantial illegal purpose.' The rule addressed employers, not a borrower's personal views or conduct. Its listed categories included alleged violations of immigration law, support for terrorism and certain forms of discrimination. It had been scheduled to take effect July 1, 2026, but judges set it aside before then.^{[2] [3]}

What the courts decided

In a June 30 decision covering suits by nonprofits and by states, U.S. District Judge Myong J. Joun in Massachusetts vacated the entire rule. He found that Congress had specified the public-service jobs eligible for PSLF and had not authorized the department to add this disqualification. He also concluded that the rule was arbitrary and capricious under administrative law and violated the First Amendment. A separate federal judge in Washington likewise struck down the rule, according to the Associated Press.^{[2] [3]}

The administration appealed those setbacks, then submitted the October 21 dismissals without giving a public explanation for the reversal, the Associated Press reported. The First Circuit stipulation is a short procedural filing: it states the parties' agreement to dismiss the appeal, not a fresh merits analysis or a settlement changing the terms of PSLF. The Massachusetts district court's order vacating the rule therefore remains in place.^{[1] [2] [3]}

What borrowers should take from it

For people working in public service, the immediate effect is that this particular employer-exclusion rule is not being implemented. PSLF's existing requirements still matter: Federal Student Aid says the program forgives the remaining balance on eligible Direct Loans after the equivalent of 120 qualifying monthly payments while a borrower works full-time for a qualifying employer. Dismissal of the appeals does not itself erase loans, certify employment or resolve a borrower's payment count.^{[2] [4]}

The litigation picture is not entirely closed. Investopedia reported that, although the department abandoned two appeals, a third appeal arising from the 22-state companion case in Massachusetts remains pending. That caveat should temper descriptions of a definitive end to every lawsuit over the rule. For now, the vacatur and the withdrawn appeals leave the preexisting PSLF employer criteria in force; borrowers can use Federal Student Aid's PSLF tools to check their own employer and qualifying-payment progress.^{[2] [4] [5]}

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