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US states, nonprofits sue over Trump rule limiting student loan forgiveness
The lawsuits filed in federal court in Boston include one case by 21 Democratic-led states and the District of Columbia and another by a coalition of cities, nonprofits and unions represented by the liberal legal group Democracy Forward.
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Reuters - Mon, 03, Nov 2025
- 15:18 EST
- 12
The U.S. Department of Education building, weeks into the continuing U.S. government shutdown, in Washington, D.C., U.S., October 21, 2025. / REUTERS/Kylie Cooper
Several Democratic-led states, cities and nonprofits filed lawsuits on Nov. 3 seeking to block a new rule by U.S. President Donald Trump's administration that would exclude organizations from a federal student loan forgiveness program if they are deemed to have a "substantial illegal purpose."
The two lawsuits argue that a rule the U.S. Department of Education announced last week would allow it to prevent people working for state or charitable organizations the administration disfavors, including those that support immigrants, gender-affirming care and diversity programs, from being eligible for the Public Service Loan Forgiveness Program.
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The program established by Congress in 2007 allows borrowers to have their federal student loans forgiven after 10 years working for government or nonprofit employers.
The lawsuits filed in federal court in Boston include one case by 21 Democratic-led states and the District of Columbia and another by a coalition of cities, nonprofits and unions represented by the liberal legal group Democracy Forward.
The Education Department's final rule, which takes effect in July, amends the definition of a "qualifying employer" to exclude organizations that have a "substantial illegal purpose," which it said includes supporting terrorism or aiding illegal immigration.
New York Attorney General Letitia James, a Democrat, in a statement said the "administration has created a political loyalty test disguised as a regulation."
The lawsuits argue that the law that created the forgiveness program does not grant the Education Department the discretion to create criteria for who is eligible for it and that the term "substantial illegal purpose" in the rule is vague, arbitrary and illegal.
Under Secretary of Education Nicholas Kent in a statement called it "unconscionable that the plaintiffs are standing up for criminal activity."
"This is a commonsense reform that will stop taxpayer dollars from subsidizing organizations involved in terrorism, child trafficking, and transgender procedures that are doing irreversible harm to children," he said.
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