Trump administration drops two appeals over public-service loan forgiveness rule
The Justice Department withdrew two appeals defending restrictions on which employers could qualify for Public Service Loan Forgiveness, leaving the underlying court rulings in place.
The Trump administration withdrew two appeals on Wednesday, October 21, 2026, that sought to defend new restrictions on the Public Service Loan Forgiveness program. The Justice Department filed one-sentence joint agreements to dismiss the appeals, with each side responsible for its own legal costs, according to the Associated Press and The Washington Post.
The withdrawals leave the underlying lower-court rulings in place in those cases. They do not create a new loan-cancellation program, erase every borrower’s debt or decide individual applications. Instead, the move ends the administration’s effort in the two appeals to revive a rule governing which public-service employers may participate.
What the administration withdrew
The Education Department adopted a rule in 2025 that would have allowed Education Secretary Linda McMahon to exclude an employer if she determined that its work had a “substantial illegal purpose.” The rule was written broadly enough to affect whether employees of a disqualified organization could count their work toward loan forgiveness.
The administration presented the change as a way to keep federal benefits from supporting unlawful activity. Critics, including states, cities and nonprofit organizations that sued, argued that the standard gave the department sweeping discretion to punish organizations because of their policy positions. Reporting by the AP said the rule focused in part on employers serving undocumented immigrants or transgender young people.
Federal judges blocked the change before it was scheduled to take effect in July. U.S. District Judge Myong Joun in Massachusetts concluded that the Education Department had exceeded its authority and raised First Amendment concerns. U.S. District Judge Amir Ali in Washington issued a similar ruling in litigation brought by nonprofit groups.
The Justice Department appealed those decisions but abandoned the two appeals on Wednesday without a public explanation, the AP reported. Because the dismissals were joint agreements rather than appellate rulings on the merits, the appeals courts did not issue new decisions resolving the broader statutory or constitutional questions.
What it means for public-service borrowers
Public Service Loan Forgiveness, commonly called PSLF, is intended for eligible government and nonprofit workers. Borrowers generally must make 120 qualifying monthly payments while working full time for a qualifying employer before the remaining balance on eligible federal Direct Loans can be forgiven.
The program covers workers across government, public education, law enforcement, fire departments, public hospitals and eligible nonprofit organizations. More than 1 million borrowers have received cancellation through PSLF, according to the AP. The dispute was therefore about access to a long-standing program, not a new across-the-board forgiveness initiative.
For borrowers, the immediate significance is that the challenged employer-disqualification rule will not be restored through these two appeals. Eligibility still depends on the program’s other requirements, including the borrower’s loan type, payment history, employment and certification records. The dismissal notices did not grant automatic relief or resolve any separate repayment dispute.
Advocates welcomed the withdrawals. Dan Zibel, an attorney with Student Defense, said in a written statement reported by the AP that the rule had attempted to use PSLF against organizations the administration opposed. Federal officials had not publicly explained the decision to drop the appeals as of Wednesday evening.
The development marks a legal retreat by the Trump administration on a policy that would have expanded executive discretion over public-service eligibility. Its practical reach will depend on how the Education Department administers PSLF after the dismissals and whether any separate litigation or future rulemaking changes the program.
Sources and image credit
Reporting: Associated Press (readable AP syndication via the Toronto Star); The Washington Post; and AP background on the lower-court rulings.
Image: The Lyndon Baines Johnson Federal Building, home to the U.S. Department of Education, photographed by Carol M. Highsmith, via Wikimedia Commons and the Library of Congress; public domain. Center-cropped to 1600×900; no text added.