Education Department Drops PSLF Appeals: What It Means for 2.3 Million Borrowers

The Trump administration has stopped defending its overhaul of Public Service Loan Forgiveness in court. The Justice Department withdrew its appeals of court rulings that struck down a rule letting the Education Department disqualify some nonprofit and government employers from the program.

For the more than 2.3 million borrowers pursuing PSLF, according to Education Department figures cited by Forbes, the result is simple: the program keeps working the way it did before.

What happened

On October 21, 2026, the Justice Department filed joint stipulations dismissing two appeals, one in the D.C. Circuit and one in the First Circuit, according to The College Investor. A day later, the appeal in a separate case brought by 22 states and the District of Columbia was also dropped, the California and Maryland attorneys general announced.

The filings gave no reason for the reversal. Each side agreed to pay its own legal costs.

What the rule would have done

The rule, finalized on October 31, 2025, would have allowed the department to disqualify employers it determined had a "substantial illegal purpose," such as aiding violations of federal immigration law or illegal discrimination. Employees of a disqualified employer would have stopped earning qualifying PSLF payments from the date of that decision.

Critics, including the state attorneys general who sued, argued the standard was vague and could reach legal but politically disfavored activities, from legal services for immigrants to diversity programs and civil protest.

Why it never took effect

Nonprofits, unions, cities and states filed lawsuits within days of the rule's publication. On June 30, 2026, one day before the rule was due to take effect, the courts vacated it. In the states' case, the U.S. District Court in Massachusetts found the rule contrary to law, arbitrary and capricious, beyond the department's authority and a violation of the First Amendment.

The government appealed in August. With those appeals now withdrawn, the June rulings stand.

What it means for borrowers

Nothing changes in how PSLF works day to day. The existing rules on which employers qualify remain in place, and the program still forgives remaining federal student loan balances for eligible public service workers after 10 years of qualifying payments.

Borrowers should keep certifying their employment, especially after a job change, and stay on a qualifying repayment plan.

Reactions

State attorneys general who brought one of the cases called the outcome a victory for public servants. Dan Zibel, chief counsel at Student Defense, which represented plaintiffs in the D.C. case, called the effort "anti-democratic and unlawful from the start."

Advocates note that other PSLF problems remain, including processing delays and changes to income-driven repayment plans. But the fight over which employers count is, for now, over.