Education Department Drops Appeals, Ending Bid to Restrict PSLF Eligibility

The Trump administration has dropped two of the three federal court appeals it filed to defend a rule that would have allowed the education secretary to disqualify certain employers from the Public Service Loan Forgiveness (PSLF) program. The dismissals, filed October 21 and October 22, 2026, leave intact June 2026 district court rulings that already blocked the rule, according to Inside Higher Ed and a report by Yahoo News based on the Associated Press.

What Happened

The Department of Justice withdrew its appeal to the U.S. Court of Appeals for the D.C. Circuit and its appeal to the First Circuit in Boston, Inside Higher Ed and University Herald reported. Under the joint dismissal agreements, each side will pay its own legal fees, according to University Herald. The Justice Department did not publicly explain its reasoning, Inside Higher Ed reported.

A third appeal, in a case brought by roughly 20 states, the District of Columbia, and other plaintiffs, remains pending, with the government's next brief due November 4, 2026, according to Yahoo News and IBTimes UK. Legal observers quoted by Inside Higher Ed said they expect that appeal to be dropped as well.

The Rule That Was Blocked

The dispute traces back to a March 2025 executive order, 'Restoring Public Service Loan Forgiveness,' which directed the Education Department to tighten PSLF eligibility, according to Inside Higher Ed and the National College Access Network (NCAN). The department finalized a rule in October 2025 giving Education Secretary Linda McMahon authority to disqualify nonprofit and government employers found to have a 'substantial illegal purpose,' and to require those employers to certify compliance under penalty of perjury, NCAN reported.

According to NCAN, the rule listed six categories of disqualifying conduct:

• Aiding violations of federal immigration law
• Supporting terrorism
• Providing gender-affirming care to minors
• Trafficking children for the purpose of emancipation
• Illegal discriminatory practices
• Violating certain state laws

Critics, including the plaintiff groups, argued the 'substantial illegal purpose' standard was vague enough to target organizations that assist undocumented immigrants, provide transgender youth health care, or conduct diversity programming, University Herald and CBS12 reported. The plaintiffs also argued the rule was arbitrary, exceeded the department's statutory authority, and violated the First Amendment, according to Inside Higher Ed.

Timeline of the Legal Fight

What It Means for Borrowers

With the appeals dropped, the June 2026 rulings stand, and the employer-disqualification rule cannot take effect, Inside Higher Ed and CBS12 reported. PSLF's existing eligibility framework — forgiveness of remaining federal student loan balances after 10 years of qualifying public service employment and 120 qualifying monthly payments — continues unchanged, according to University Herald and IBTimes UK.

The program, created in 2007, has already forgiven debt for more than 1 million borrowers, CBS12 and IBTimes UK reported; a report by Yahoo News citing AP put the total at nearly 1.2 million borrowers and $87.6 billion in forgiven debt as of September 2025.

Public Citizen, one of the groups involved in the litigation, said through its attorney that the administration never had a legal basis for what it described as politicizing the program, CBS12 reported. Judges Myong Joun in Massachusetts and Amir Ali in Washington, D.C. issued the June 30 rulings against the rule, University Herald reported.