Background: The U.S. Department of Education building in Washington, D.C., on Dec. 3, 2024. (AP Photo/Jose Luis Magana, File). Inset: President Donald Trump walks from Marine One after arriving on the South Lawn of the White House on Tuesday, July 15, 2025, in Washington. (AP Photo/Alex Brandon, File).
Two federal judges this week rejected the Trump administration’s effort to limit eligibility for a major student loan forgiveness program, ruling in separate cases that the policy is unlawful.
At issue is the U.S. Department of Education’s final rule governing the Public Service Loan Forgiveness program, known as PSLF. The department said the change was intended to prevent organizations involved in “illegal” activities from qualifying under the program.
But U.S. District Judge Myong J. Joun found that allowing the administration to decide which organizations are engaged in illegal conduct would be “arbitrary” and beyond the White House’s authority. In one of the cases, Joun also wrote that the administration’s “history of prosecution” indicated such decisions could be driven less by legal standards than by whether officials agree with an organization’s mission.
Joun, who was appointed by President Joe Biden, outlined the background of the program and the legal challenge in a 68-page order issued one day before the rule was scheduled to take effect. Congress created PSLF in 2007 after “[r]ecognizing the need to encourage matriculation and retention in public service,” establishing a pathway to “forgive the balance of a borrower’s student loan in exchange for ten years of employment in a qualifying public service job and 120 loan payments.”
The Education Department announced the rule change in October 2025, arguing that a narrower definition of qualifying employers would “prevent taxpayers from supporting loan forgiveness for borrowers whose organizations are breaking the law.” The administration revised the definition of a “qualifying employer” to exclude groups that engage in illegal activities to the extent that they have a “substantial illegal purpose.”
The rule listed six categories of conduct the Trump administration said could amount to a “substantial illegal purpose.” Those included “[a]iding or abetting violations” of federal immigration laws and what the rule described as “child abuse, including the chemical and surgical castration or mutilation of children or the trafficking of children to so-called transgender sanctuary States.”
A coalition that included 22 states filed suit in Massachusetts, where Joun presides, seeking to block the policy. Several organizations brought a separate challenge in Washington, D.C., where the case was assigned to U.S. District Judge Amir H. Ali, also a Biden appointee.
The plaintiffs argued that they would suffer business disadvantages because individuals would seek employment elsewhere and the “threat of disqualification” would “itself deter new workers from entering public service.”
Furthermore, the organizations in the Washington, D.C., case argue that the “requirement that the plaintiffs affirmatively certify they have not participated in activities that have a ‘substantial illegal purpose’ clearly imposes a new obligation that goes beyond what the plaintiffs are already doing by following the law.”
The administration has argued “that there exists no threat of enforcement because the Department has not made any indication that any of the Plaintiffs will (or are likely to be) the target of any enforcement activity,” as Joun recounts in the Massachusetts case.
The judge found this rationale unconvincing.
“In the absence of evidence to the contrary, Defendants’ arguments might be persuasive. But the Administration’s history of prosecution tells a different story,” he writes, pointing to an example of the “ire” shown “toward those with immigration policies contrary to those held by the Administration.” The judge added: “Even beyond immigration, the Administration has threatened legal action against generally lawful activity with which it disagrees.”
Joun continues:
The rule thus leaves regulated entities to speculate about the scope of prohibited conduct while vesting the Department with substantial discretion to determine, after the fact, whether an employer has crossed an undefined line. Such indeterminate standards create a substantial risk of arbitrary enforcement. As Plaintiffs note, the Administration has prioritized enforcement in areas such as diversity, equity, and inclusion initiatives, raising the possibility that otherwise lawful conduct could be treated as evidence of “illegal discrimination” under the Final Rule’s undefined standards. … By failing to articulate objective standards governing what constitutes “substantial illegal activity,” “aiding and abetting,” or a “pattern” of unlawful conduct, the Department has left employers to guess at their obligations while reserving broad discretion to determine eligibility on an ad hoc basis. That lack of ascertainable standards is itself a hallmark of arbitrary and capricious decision-making.
He concludes by saying the rule is “contrary to law and promulgated in excess of statutory authority,” as well as “arbitrary and capricious” and “violates the First Amendment.”
Ali ruled similarly in the Washington, D.C., case, finding that Education Secretary Linda McMahon exceeded her statutory authority.
