Federal Judges Invalidate Trump Administration’s Attempts to Restrict Public Service Loan Forgiveness

Two federal judges have issued injunctions that prevent the Trump administration from excluding workers at nonprofit organizations from the Public Service Loan Forgiveness program. These rulings, delivered on June 30, 2026, effectively halted the government’s attempt to bar employees of charities that held political views contrary to the administration’s agenda. The judges determined that the administration lacked the legal authority to deny debt cancellation benefits based solely on the political or social stances of the employers. This decision reinforces the principle that federal benefits cannot be withheld as a form of political retaliation.

As a law professor specializing in the nonprofit sector, I maintain that both judges acted correctly. The vitality of the United States’ nonprofit sector depends heavily on its autonomy from government control. The First Amendment mandates that laws regulating nonprofits remain politically neutral. No presidential administration possesses the power to penalize an organization simply because its mission or viewpoints diverge from those of the White House. The separation of political ideology from eligibility for federal benefits is a cornerstone of democratic governance. By striking down these restrictions, the courts have protected the integrity of the legal framework that supports civil society.

Congress established the Public Service Loan Forgiveness (PSLF) program in 2007 to address the financial burdens carried by individuals in public service careers. This initiative cancels the remaining balance on federal student loans for qualifying borrowers. To be eligible, individuals must make 120 consistent monthly payments over a ten-year period. Participation is restricted to those employed full-time by qualifying employers, which include government agencies at all levels, public schools, and charitable nonprofit organizations.

One primary objective of the program is to incentivize young Americans to pursue careers that serve the public interest. Many of these roles, such as teaching, social work, and public health, offer salaries that are significantly lower than those available in the private sector. For individuals burdened by substantial student debt, the promise of future loan forgiveness makes these lower-paying, high-impact jobs financially viable. However, the government does not automatically erase debt. The Department of Education must verify that borrowers have met all specific requirements, including a decade of steady, on-time payments. This process applies to teachers, government officials, and employees of diverse nonprofits, including food banks, museums, and advocacy groups.

Before the recent legal challenges, the stability of debt relief for borrowers employed by certain nonprofits was severely threatened. Since its inception, the program has canceled more than $87 billion in student loan debt for nearly 1.2 million Americans. On average, individual borrowers have seen approximately $74,000 in debt erased. This financial relief has been crucial for thousands of professionals who dedicate their careers to public service. The program serves as a critical economic support system for workers in essential societal roles.

On March 7, 2025, President Donald Trump issued an executive order directing the Department of Education to redefine eligibility for the PSLF program. In the order, the President criticized participants who worked for organizations that he claimed "actually harm our society and American values, sometimes through criminal means." The order did not identify specific nonprofits by name. Instead, it listed categories of activities that the administration disapproved of, including aiding undocumented immigrants, providing medical treatment for gender dysphoria in minors, advancing diversity initiatives, and organizing left-wing protests.

President Trump declared that the government should refuse to forgive loan balances for borrowers employed by organizations engaged in these activities. Although executive orders are not directly binding regulations, they guide the creation of federal rules. On October 31, 2025, the Education Department issued a new regulation based on this directive. The regulation proposed excluding employers that "engage in specific enumerated illegal activities such that they have a substantial illegal purpose."

This legal phrase is derived from nonprofit law. Charitable organizations that have an illegal purpose are generally ineligible for tax-exempt status. However, this doctrine has historically been applied in very limited circumstances. The government had never previously established detailed rules to ensure that this power was not abused. Rather than creating safeguards against arbitrary enforcement, the new regulation identified specific social and political issues that the Trump administration opposed, treating them as high priorities for exclusion from the loan forgiveness program.

Under the proposed rule, an employer would be disqualified if the Education Department determined that the organization used illegal means to advance its goals. A coalition consisting of 22 state attorneys general, numerous nonprofits, municipal governments, and labor unions filed separate lawsuits on November 3, 2025, to block the regulation. These cases were later consolidated into a single legal challenge. Another group of nonprofits filed a similar lawsuit the following day. These legal actions underscore the widespread concern regarding the potential politicization of federal student aid.

On the day the new rule was scheduled to take effect, two judges issued decisions striking it down. U.S. District Court Judge Myong Joun in Massachusetts and U.S. District Court Judge Amir Ali in Washington, D.C., prevented the Department of Education from implementing the changes.

More than a year after the initial executive order, both judges concluded that the original statute passed by Congress was unambiguous. The law clearly defined eligible employers as all nonprofits with 501(c)(3) tax-exempt status. Because the statutory language was so explicit, the Education Department had no legal authority to alter eligibility criteria to exclude specific organizations based on their political activities.

Both judges ruled that the Education Department exceeded its statutory authority. The department effectively granted itself the power to decide which nonprofits’ employees were ineligible. However, organizations that serve an illegal purpose are already ineligible for tax-exempt status. Consequently, no such organization could have participated in the loan forgiveness program under existing law anyway. Judges Joun and Ali determined that the Trump administration could not rewrite the rules to punish individuals for working at nonprofits they disliked. Furthermore, the government cannot use the PSLF program as a vehicle to advance its own political agenda. The judges emphasized that administrative agencies must adhere strictly to the boundaries set by Congress.

These rulings offer significant relief to borrowers who work for nonprofits whose missions conflict with the Trump administration’s political objectives. Both rulings vacated the new regulation, meaning the federal government cannot implement the revised rule anywhere in the United States. The status quo remains: eligibility is determined by tax-exempt status, not by the political activities of the employer.

In 2025, the U.S. Supreme Court ruled that district court judges could not impose nationwide injunctions in certain types of cases. However, that precedent does not apply to court decisions that invalidate agency regulations. The administration retains the right to appeal these decisions. An appellate court could potentially restore the new regulation, or the Supreme Court could choose to hear the case at a later date.

Although the current Supreme Court has expanded executive power in some contexts, it has simultaneously reduced the leeway administrative agencies have to issue regulations that add requirements to clear statutes. In my view, the Supreme Court would be unlikely to side with the administration if it were to take up this case. The justices have shown a willingness to check overreach by federal agencies when they exceed their statutory mandate. This judicial trend suggests a robust commitment to limiting executive discretion in areas where Congress has already spoken clearly.

While both judges agreed that the revised rule exceeded the Education Department’s authority, Judge Joun in Massachusetts went further in her reasoning. Judge Joun held that the new regulation is facially unconstitutional because it discriminates on the basis of viewpoint.

This distinction is critically important. Judge Joun recognized that "selectively targeting" organizations because their goals contradict those of the administration is fundamentally different from trying to prevent employees of criminal organizations from having their student loans forgiven. The Trump administration has been aggressively conflating these two distinct concepts.

Because organizations’ viewpoints are protected by the U.S. Constitution, the government cannot discriminate in the PSLF program against an organization that advocates for the rights of undocumented immigrants. This constitutional protection applies equally to organizations that seek stricter immigration enforcement. On the other hand, violent or illegal tactics are not protected by the Constitution. Furthermore, organizations employing illegal tactics are not eligible for tax-exempt status. This means an organization that breaks the law can legitimately be denied federal benefits.

The regulation the Trump administration sought to implement expressly blurred these lines. I interpret this conflation as a tactic intended to chill protected activity. It instills fear in individuals and groups who disagree with the administration’s policies, discouraging them from engaging in lawful advocacy. I view Judge Joun’s opinion as a vital bulwark against this type of intimidation and political retaliation. By clearly separating lawful political advocacy from illegal conduct, the judiciary has preserved the space necessary for diverse viewpoints to flourish within the nonprofit sector.

These rulings should provide Americans of all political stripes with greater confidence that their constitutional rights will be respected. This protection holds true regardless of which party holds the presidency. The court system continues to serve as a necessary check on executive power, ensuring that government programs do not become tools for punishing political opponents or rewarding allies. The stability of this legal framework is essential for maintaining public trust in federal institutions and ensuring that public service remains a viable and equitable career path for all qualified individuals.