PSLF Rule Appeals Dropped: What It Means for Student Loan Forgiveness

The US Education Department has dropped its appeals in the legal fight over new Public Service Loan Forgiveness (PSLF) rules, leaving in place court rulings that struck down restrictions which could have cut off forgiveness for some public service workers. The rules would have let the department disqualify certain government and nonprofit employers it judged to have a “substantial illegal purpose”.

The decision, reported this week by Forbes and confirmed by the Maryland Attorney General’s office, means PSLF continues to operate under the existing rules. More than 2.3 million borrowers are pursuing PSLF, according to Education Department data cited by Forbes.

What Did the PSLF Rule Try to Change?

PSLF forgives the remaining federal student loans of borrowers who work in qualifying public service jobs and make 10 years of qualifying payments. Following an executive order, the Education Department wrote new regulations giving the education secretary power to disqualify employers it considered to be engaged in a “substantial illegal purpose”.

The department said the change was needed to ensure taxpayers were not subsidising organisations involved in unlawful activity. Critics argued it could be used to target groups working on immigration, LGBTQ rights, civil rights or political activism, as well as Democratic-led state and city governments. According to Maryland’s Attorney General, the rule’s targets included providing legal services to immigrants, gender-affirming care for minors, diversity, equity and inclusion initiatives, and civil protest.

Forbes noted that borrowers whose employer was deemed ineligible would have had no right of appeal and would have had to change jobs to keep working towards forgiveness.

Why Did the Courts Block It?

In June 2026, two federal judges reviewing three separate lawsuits blocked the rules shortly before they were due to take effect. The challenges were brought by civil rights groups, labour unions, nonprofit organisations and Democratic-led states and cities, including a coalition of 22 attorneys general.

One court wrote that “there is no doubt that Congress spoke plainly and comprehensively on the scope of the term ‘public service job'”. According to the Maryland Attorney General’s office, the US District Court for the District of Massachusetts found the regulations contrary to law, arbitrary and capricious, beyond the agency’s statutory authority, and in violation of the First Amendment.

What Happens Now That the Appeals Are Dropped?

The Education Department had said in August that it would appeal. It has now agreed, in a joint stipulation, “to the dismissal of this action in its entirety”, without giving a formal explanation, Forbes reported. With the appeals withdrawn, the court orders vacating the rule stand.

“With the appeal dismissed, the court’s order vacating the rule stands, and PSLF remains as Congress designed it,” said Diane Yentel, president and chief executive of the National Council of Nonprofits. Patrick Moran, president of the AFSCME union, said: “We’re glad the administration is now following the law and abandoning this illegal scheme.”

Maryland Attorney General Anthony G. Brown said: “By defeating the unlawful rule, we are ensuring that no one is punished because their employer’s mission does not match the President’s politics.”

What Should PSLF Borrowers Do Next?

Borrowers working for government bodies and nonprofits that already qualify should continue certifying their employment and making qualifying payments as normal. Keeping copies of employment certification forms and payment records is a sensible precaution.

Forbes warned that other pressures remain. Changes to income-driven repayment plans are affecting more than 13 million borrowers, and many PSLF borrowers have reported delays in processing employment certifications, qualifying payments and PSLF Buyback requests, as well as some cases of credit being rescinded. Borrowers who believe their payment count is wrong can ask their servicer for a review.

• Rule status: vacated by the courts; appeals now withdrawn.
• Who benefits: more than 2.3 million borrowers pursuing PSLF.
• Still pending issues: repayment plan changes and processing delays.
• Action: keep certifying employment and tracking qualifying payments.

For more on student debt, read our guides to federal vs private student loans and our report on student loan wage garnishment for borrowers in default.

Featured image: entrance to the US Department of Education’s Lyndon Baines Johnson building in Washington, DC, by G. Edward Johnson / Wikimedia Commons, CC BY 4.0.

Sources

• Forbes — 2.3 Million Student Loan Borrowers Get Huge Win Against Education Department In Loan Forgiveness Fight (23 October 2026).
• Office of the Attorney General of Maryland — Attorney General Brown Protects Public Service Loan Forgiveness as Trump Administration Drops Appeal.
• The Washington Post — DOJ drops fight to put Trump’s restrictions on public service loan forgiveness (21 October 2026).