The U.S. Department of Education finalized new regulations October 31, granting itself authority to disqualify entire agencies or organizations from PSLF eligibility.
Washington Attorney General Nick Brown and a coalition of 21 other state attorneys general are challenging the U.S. Department of Education over what they characterize as illegal restrictions to the Public Service Loan Forgiveness program.
The lawsuit contests a new federal regulation that would permit the department to declare certain state and local governments or nonprofit organizations ineligible for the program if the administration determines they have engaged in activities with a “substantial illegal purpose.”
Brown indicated the regulation undermines a program designed to help public servants manage higher education costs.
“The PSLF program helps people afford to pursue public service careers without the weight of crushing debt of college or graduate school loans,” Brown stated. “Giving back to the community is a good thing that should be encouraged. But now, once again, the administration is showing just how little regard it has for the people who keep our cities and states running.”
The PSLF program, created by Congress in 2007, forgives remaining federal student loan debt after 10 years of qualifying public service and consistent payments. It has enabled more than 1 million public employees to work in fields such as education, healthcare and law enforcement.
The DOE finalized the new regulation October 31, granting itself authority to disqualify entire agencies or organizations from PSLF eligibility if it determines they have a “substantial illegal purpose.” The regulation, scheduled to take effect in July 2026, offers limited definitions of that term. According to the coalition, the definition could include organizations that support undocumented immigrants, provide gender-affirming care to transgender youth, promote diversity and inclusion or engage in political protest. The regulation explicitly states that it includes “supporting terrorism and aiding and abetting illegal immigration.”
“Taxpayer funds should never directly or indirectly subsidize illegal activity. The Public Service Loan Forgiveness program was meant to support Americans who dedicate their careers to public service, not to subsidize organizations that violate the law, whether by harboring illegal immigrants or performing prohibited medical procedures that attempt to transition children away from their biological sex,” stated Under Secretary of Education Nicholas Kent in a statement on the regulation.
The attorneys general argue the regulation is vague, unlawful and politically motivated. They contend it could strip eligibility from thousands of public workers “through no fault of their own,” causing staffing shortages and increased costs for state and local governments.
The DOE estimates the regulation will generate an additional $1.5 billion in loan payments nationwide over the next decade from borrowers who would lose PSLF eligibility. In Washington, more than 23,000 borrowers have had a combined $1.62 million in loans forgiven since 2021, according to the attorney general’s office.
The lawsuit requests the court to “declare the rule unlawful, vacate it and bar the [DOE] from enforcing or implementing it.” The coalition argues the PSLF statute guarantees forgiveness for anyone who works full time in qualifying public service, without giving the federal government discretion to exclude employers based on ideology.
Joining Washington in the lawsuit are the attorneys general of New York, Massachusetts, California, Colorado, Arizona, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Wisconsin and the District of Columbia.
The 22-state coalition representing predominantly Democratic jurisdictions demonstrating partisan divide, with the attorneys general filing suit coming exclusively from blue states suggesting the federal regulation targets progressive policies that Republican administrations oppose creating a constitutional confrontation where federal executive authority collides with state sovereignty over employment and social services.
The Public Service Loan Forgiveness program’s congressional creation in 2007 establishing statutory framework, with the legislative origin indicating that Congress rather than executive agencies designed the program’s parameters raising questions about whether Education Department possesses authority to fundamentally alter eligibility criteria without new congressional authorization.
The “substantial illegal purpose” standard introducing subjective determination, with the vague criterion granting Education Department officials enormous discretion to declare organizations ineligible based on contested interpretations of what constitutes illegal activity when many challenged practices involve policy disagreements rather than clear statutory violations.
Attorney General Nick Brown’s emphasis on public servant support framing lawsuit as worker protection, with the statement positioning Washington’s challenge as defending teachers, nurses, social workers, and other government employees from federal overreach that would punish individual workers for their employers’ policy choices they didn’t control.
The “crushing debt” characterization acknowledging student loan crisis, with Brown’s language recognizing that higher education costs have created financial burdens requiring loan forgiveness programs enabling public service careers that pay lower salaries than private sector alternatives requiring debt relief to attract qualified professionals.
The “giving back to the community” framing elevating public service, with the characterization presenting government and nonprofit work as altruistic contribution deserving support rather than merely employment suggesting that loan forgiveness represents earned benefit for societal contributions not simple government largesse.
The administration criticism about “little regard” for public workers articulating political grievance, with Brown’s accusation that federal officials disrespect state and local employees reflecting broader progressive narrative that Trump administration policies demonstrate hostility toward government workers and the public services they provide.
The 1 million public employees benefiting from PSLF quantifying program scale, with the substantial number of recipients demonstrating the program’s significance for public sector workforce recruitment and retention where loan forgiveness enables professionals to pursue modestly compensated careers serving communities rather than higher-paying private employment.
The education, healthcare, and law enforcement examples spanning ideological spectrum, with the diverse occupations benefiting from PSLF including both progressive-associated fields like social work and conservative-favored professions like policing suggesting the regulation’s impacts transcend partisan lines affecting workers across the political spectrum.
The October 31 finalization timing providing limited implementation window, with the regulation completion occurring months before July 2026 effective date creating period for legal challenges to proceed through courts potentially blocking implementation before any borrowers lose eligibility or organizations face disqualification.
The self-granted authority characterization questioning regulatory legitimacy, with the lawsuit’s framing emphasizing that Education Department officials unilaterally created the disqualification power rather than Congress authorizing it suggesting the regulation exceeds statutory boundaries through administrative overreach.
The “substantial illegal purpose” definition ambiguity creating enforcement unpredictability, with the regulation’s limited explanation of what activities trigger disqualification leaving organizations uncertain whether their operations risk losing PSLF eligibility for employees creating chilling effects where fear of consequences may alter programming to avoid potential federal scrutiny.
The undocumented immigrant support inclusion targeting sanctuary policies, with the regulation’s explicit mention of “aiding and abetting illegal immigration” threatening organizations that provide services to undocumented populations including hospitals treating uninsured patients, schools educating immigrant children, and nonprofits offering legal assistance.
The gender-affirming care reference targeting transgender youth services, with the potential disqualification of healthcare providers offering puberty blockers, hormone therapy, or surgical interventions reflecting Trump administration opposition to transgender medical treatments that it characterizes as harmful experimentation on minors.
The diversity and inclusion mention threatening DEI programs, with the regulation potentially encompassing organizations promoting racial equity, affirmative action, or LGBTQ+ inclusion that conservative critics characterize as discriminatory or illegal despite their prevalence in government agencies and nonprofit sectors.
The political protest inclusion chilling activism, with the possibility that organizations supporting demonstrations, advocacy campaigns, or civil disobedience could lose PSLF eligibility deterring nonprofit engagement with contentious issues requiring public pressure for policy changes.
The terrorism support and illegal immigration explicit mentions providing concrete examples, with Under Secretary Kent’s statement identifying specific prohibited activities though the pairing of terrorism (universally condemned) with immigration assistance (legally contested) conflating vastly different activities under single regulatory framework.
The “taxpayer funds should never subsidize illegal activity” assertion justifying regulation, with Kent’s rationale framing loan forgiveness as government subsidy for organizations rather than earned benefit for individual employees creating philosophical reframing where worker debt relief becomes employer support.
The “harboring illegal immigrants” and “prohibited medical procedures” language revealing priorities, with Kent’s specific examples demonstrating that immigration enforcement and transgender youth medical treatment represent primary regulatory targets rather than abstract concern about illegal activities.
The vague, unlawful, and politically motivated characterization articulating legal theory, with attorneys general arguing the regulation violates administrative procedure requirements for clear standards while pursuing partisan agenda targeting progressive organizations and policies that Trump administration opposes.
The “through no fault of their own” emphasis highlighting individual worker harm, with the argument stressing that employees who chose careers partly based on loan forgiveness availability would lose benefits because of employer actions they neither controlled nor possibly even knew about creating unjust punishment.
The staffing shortage and increased cost predictions identifying state impacts, with attorneys general warning that PSLF loss would make public service careers less attractive requiring states and localities to increase salaries to compete with private sector or accept reduced workforce quality as qualified candidates pursue better-compensated alternatives.
The $1.5 billion nationwide payment estimate quantifying borrower impact, with Education Department’s projection that loan forgiveness denial will generate additional debt payments demonstrating the regulation’s substantial financial consequences for affected public servants though the figure represents small fraction of overall student loan debt.
The 23,000 Washington borrowers with $1.62 million forgiven since 2021 establishing state-specific stakes, with the statistics demonstrating that thousands of Washington public servants have relied on PSLF creating constituency of workers and their employers with direct interest in preserving program access.
