The U.S. Department of Education finalized the new rule Oct. 31, granting itself authority to disqualify entire agencies or organizations from PSLF eligibility.
OLYMPIA, Wash. — Washington Attorney General Nick Brown and a coalition of 21 other attorneys general are suing the U.S. Department of Education (DOE) over what they call illegal restrictions to the Public Service Loan Forgiveness (PSLF) program.
The lawsuit challenges a new federal rule that would allow the department to deem certain state and local governments or nonprofit organizations ineligible for the program if the administration determines they have engaged in activities with a “substantial illegal purpose.”
Brown said the rule undermines a program designed to help public servants manage the cost of higher education.
“The PSLF program helps people afford to pursue public service careers without the weight of crushing debt of college or graduate school loans,” Brown said in a statement. “Giving back to the community is a good thing that should be encouraged. But now, once again, the administration is showing just how little regard it has for the people who keep our cities and states running.”
The PSLF program, created by Congress in 2007, forgives remaining federal student loan debt after 10 years of qualifying public service and consistent payments. It has enabled more than 1 million public employees to work in fields such as education, health care and law enforcement.
The DOE finalized the new rule Oct. 31, granting itself authority to disqualify entire agencies or organizations from PSLF eligibility if it determines they have a “substantial illegal purpose.” The rule, set to take effect in July 2026, offers limited definitions of that term. According to the coalition, the definition could include organizations that support undocumented immigrants, provide gender-affirming care to transgender youth, promote diversity and inclusion or engage in political protest. The rule explicitly states that it includes “supporting terrorism and aiding and abetting illegal immigration.”
“Taxpayer funds should never directly or indirectly subsidize illegal activity. The Public Service Loan Forgiveness program was meant to support Americans who dedicate their careers to public service – not to subsidize organizations that violate the law, whether by harboring illegal immigrants or performing prohibited medical procedures that attempt to transition children away from their biological sex,” said Under Secretary of Education Nicholas Kent in a statement on the rule.
The attorneys general argue the rule is vague, unlawful and politically motivated. They contend it could strip eligibility from thousands of public workers “through no fault of their own,” causing staffing shortages and increased costs for state and local governments.
The DOE estimates the rule will generate an additional $1.5 billion in loan payments nationwide over the next decade from borrowers who would lose PSLF eligibility. In Washington, more than 23,000 borrowers have had a combined $1.62 million in loans forgiven since 2021, according to the attorney general’s office.
The lawsuit asks the court to “declare the rule unlawful, vacate it and bar the [DOE] from enforcing or implementing it.” The coalition argues the PSLF statute guarantees forgiveness for anyone who works full time in qualifying public service, without giving the federal government discretion to exclude employers based on ideology.
Joining Washington in the lawsuit are the attorneys general of New York, Massachusetts, California, Colorado, Arizona, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Wisconsin and the District of Columbia.
