Student Loan Forgiveness Approved For Another 11,500 Borrowers, But New Rules Could Block Future Relief

Thousands Of Student Loan Forgiveness Approvals Under PSLF

The Education Department’s latest status update indicates that approximately 11,500 borrowers received student loan forgiveness under PSLF during the month of April. The department has been issuing a steady stream of approvals since it first started posting status reports last year. More than 10,000 borrowers had their student loans discharged under PSLF in March, said the department in last month’s status update, and more than 12,000 borrowers received discharges under PSLF in February.

The department is also approving student loan forgiveness through PSLF Buyback, a related program that allows borrowers to make a lump sum payment to retroactively count certain non-qualifying periods of deferment and forbearance. The department has been contending with significant backlogs and delays associated with the PSLF Buyback program, with some borrowers waiting two years or more for a decision. But in this week’s status update, the department indicated that approximately 6,600 borrowers were approved for student loan forgiveness under PSLF Buyback. This represents a new processing high for the department, and could be a sign of stepped-up processing that has resulted in the first-ever decrease in the backlog of applications.

Education Department Moving Forward With Rules To Restrict Student Loan Forgiveness Under PSLF

But the ongoing waves of student loan forgiveness under PSLF are clouded by the Trump administration’s imminent efforts to enact new restrictions on the program. The Education Department is moving forward with finalized regulations that, if enacted, would give Education Secretary Linda McMahon the power to disqualify employers from continuing to participate in PSLF if they engage in activities that the department determines has a “substantial illegal purpose.” The new rules, which are set to be implemented on July 1, are the culmination of efforts to codify President Donald Trump’s executive order issued more than a year ago that directed the department to bar certain organizations and their employees from the program.

“The proposed regulations would prevent taxpayer-funded PSLF benefits from being improperly provided to individuals who are employed by organizations that engage in activities that have a substantial illegal purpose,” said the department in a summary included with the initial publication of the proposed new rules in the Federal Register last summer. “These proposed changes are intended to improve the administration of the PSLF program and provide protection for taxpayers.”

The rules would target certain organizations, potentially including nonprofit groups as well as city or municipal governments, that the department determines has facilitated the violation of federal immigration laws, engaged in what the department characterizes as unlawful discrimination, or provided certain gender-affirming medical care to transgender youth, among other activities. The Trump administration has argued that the rules are necessary to ensure that the student loan forgiveness benefits of the PSLF program flow only to organizations engaged in lawful activity. But critics contend that the restrictions would allow the Education Department to weaponize PSLF by disqualifying organizations and Democratic-led state and city governments whose activities are perfectly legal but are simply disfavored by the administration, such as not cooperating with federal immigration enforcement or having DEI initiatives.

Legal Battle Over Proposed Student Loan Forgiveness Limits For PSLF Intensifies

The Education Department is currently facing at least three separate legal challenges over the proposed student loan forgiveness changes for the PSLF program. The lawsuits have been filed by separate coalitions of nonprofit organizations and Democratic-led states and municipalities. In all three cases, the challengers have filed motions for summary judgment, asking the courts to issue rulings blocking the PSLF restrictions before they are set to go into effect on July 1.

“Since the PSLF Statute was enacted, the PSLF Regulation has rightfully adhered to the mandate set out by Congress, which provides that all government jobs are PSLF-eligible, with the sole exception of members of Congress themselves,” said the challengers in their summary judgment motion in one of the lawsuits led by the Commonwealth of Massachusetts and other Democratic-led state governments. “The status quo changed when the Department of Education (“ED”) promulgated the Final Rule at issue in this case, which allows ED to strip eligibility for PSLF from public service workers by designating their employers, including State governments, as having a ‘substantial illegal purpose.’ In so doing, ED weaponizes PSLF to target groups and initiatives that this Administration disfavors.”

The challengers contend that the rules to disqualify organizations and governments from participating in the student loan forgiveness benefits of PSLF violate the statute Congress enacted to create the program in 2007. The statutory text, they argue, contains no provision authorizing the department to broadly disqualify eligible borrowers based on their activities. Some of the challengers also raise constitutional concerns, arguing that the rules amount to viewpoint discrimination and a violation of constitutionally protected freedom of speech and assembly. But the Education Department defended the PSLF rules as perfectly legal.

“Defendants chiefly maintain that the PSLF Final Rule closely tracks the PSLF program’s text and purpose by ensuring that only those professions that advance the public interest constitute eligible public service jobs,” argued the department in a reply brief filed last month in two of the challenges, including the one brought by the Commonwealth of Massachusetts. “The PSLF Final Rule explains that it is ‘a necessary evolution of PSLF oversight’ because it ‘strengthens the fundamental purpose of PSLF—to encourage borrowers to enter occupations that improve their communities and advance the public good while also guarding against the diversion of Federal benefits to organizations that harm their fellow Americans by engaging in illegal conduct.’”

The court in the challenge brought by Massachusetts and other Democratic-led states (including New York, California, Colorado, and Arizona) has scheduled a hearing for June 6, where both sides will be able to plead their case. It is unclear, however, if the court in any of the three challenges will be able to issue a ruling prior to July 1, which is when the student loan forgiveness restrictions under PSLF are scheduled to take effect. If the new rules are enacted, and the Education Department begins disqualifying employers, borrowers wouldn’t lose any PSLF credit they have already earned, but an employer disqualification could prevent them from getting any more PSLF credit or discharging their student loans under the program.