Judges Strike Down PSLF Regulations

On June 30, 2026, two federal district courts vacated the Department of Education's final Public Service Loan Forgiveness (PSLF) rule just before it was set to take effect on July 1, 2026. 

The rule, issued in response to Executive Order 14235, redefined "qualifying employer" to exclude organizations found to have a "substantial illegal purpose,” a new category covering things like aiding immigration-law violations, "illegal discrimination," and gender-affirming care for minors, giving the Secretary discretion to disqualify employers (and thus their employees) who had otherwise met Congress's statutory criteria. 

In the District of Massachusetts, the court held the rule contrary to law and in excess of statutory authority because Congress's broad, largely unqualified list of "public service job" categories left the Department no gap to narrow, and separately found the rule arbitrary and capricious (no rational problem identified, inconsistent and ambiguous "substantial illegal purpose" standards, reliance on the administration's policy priorities rather than the statute's purpose) and unconstitutional as viewpoint discrimination under the First Amendment. 

In the District of Columbia, the court reached the same bottom line on narrower grounds: the Higher Education Act's mandatory "shall cancel" language requires crediting any borrower working full-time at a qualifying 501(c)(3), with no textual basis allowing the Secretary to pick and choose among them based on her own activity-based determinations. 

Both courts rejected the government's argument that general rulemaking authority or overlapping statutory categories implicitly authorized the exclusion, and the D.C. court specifically rejected the government's reliance on the IRS's Bob Jones tax-exemption precedent for lack of any comparable historical pedigree in the loan-forgiveness context. 

The D.C. court, having resolved the case on statutory grounds, expressly declined to reach the arbitrary-and-capricious, vagueness, and First Amendment claims that the Massachusetts court addressed head-on. 

Both rulings vacate the rule in full, meaning the pre-existing "qualifying employer" definition remains in effect nationwide under either decision independently.

For more information, please contact:
Justin Monk