The U.S. Justice Department has withdrawn two appeals seeking to reinstate restrictions on the Public Service Loan Forgiveness program, a student loan forgiveness outcome that leaves existing eligibility rules intact for millions of federal borrowers working in government and nonprofit jobs.
The decision, announced Oct 21, 2026, ends the administration’s challenges to two federal court rulings issued in June that invalidated revised eligibility regulations introduced under President Donald Trump. The administration did not explain why it dropped the appeals.
The disputed regulations were developed after an executive order Trump signed in 2025 and finalized in October 2025. They were set to take effect July 1, 2026. The proposed changes would have given Education Secretary Linda McMahon authority to disqualify employers from PSLF if the department determined their activities had a “substantial illegal purpose.”
Potential grounds for exclusion included assisting undocumented immigrants, providing gender transition care to minors and engaging in certain diversity, equity and inclusion activities. The restrictions targeted employer eligibility rather than individual borrowers directly, but employees of disqualified organizations could have lost access to loan forgiveness based on their employer’s activities.
PSLF is the federal government’s student loan forgiveness program for public servants. It allows eligible government and nonprofit employees to have their remaining federal student loan debt forgiven after 10 years of qualifying public service and 120 monthly payments. More than 2.3 million borrowers are pursuing forgiveness under the program, according to U.S. Education Department data.
The program’s size is the reason the rule drew such a fight. With 2.3 million borrowers in the pipeline, any change to employer eligibility would have touched workers across the government and nonprofit workforce.
Student loan forgiveness rule the courts blocked
A coalition of nonprofit organizations, state and municipal governments, and labor groups challenged the regulations in federal court, arguing against the administration’s expanded authority to decide which employers qualified.
The challengers argued the administration was claiming a power the statute did not give it: the right to strike organizations from the program based on the department’s judgment of their activities.
Two federal court decisions in June struck down the revised requirements before they could take effect on July 1. The Justice Department appealed both rulings, then withdrew those challenges in October.
With the appeals gone, the student loan forgiveness restrictions cannot take effect through this rule. The withdrawal preserves the existing framework for determining eligibility under the nearly two-decade-old bipartisan program.
Student loan forgiveness path for 2.3 million borrowers
For the more than 2.3 million borrowers pursuing PSLF, the dropped appeal removes a direct threat to their student loan forgiveness plans. Had the rule taken effect, workers could have lost access to forgiveness because of activities their employers engaged in.
In practice, the “substantial illegal purpose” standard would have let the Education Department cut off loan forgiveness for workers at organizations whose activities it disfavored, from groups assisting undocumented immigrants to providers of gender transition care for minors.
Advocacy organizations representing student borrowers welcomed the decision. Daniel Zibel, chief counsel at Student Defense, called it “a significant victory for millions of Americans who have dedicated their careers to public service,” adding that the administration’s attempt to weaponize the program against organizations it disagreed with was “anti-democratic and unlawful from the start.”
Public Citizen, which backed borrowers in the legal fight, called the outcome an important win for nonprofit and public service workers pursuing student loan forgiveness.
Borrowers in the program work full time in qualifying public service jobs while making 120 monthly payments. For them, the program’s existing requirements of qualifying public service employment and 120 monthly loan payments remain unchanged by the abandoned appeals.
What remains in the student loan forgiveness fight
The fight is not fully over. A separate appeal involving a lawsuit by 22 states remains pending, and its outcome could still reshape the program.
The administration has not explained why it dropped this appeal while the states’ case continues. For now, the student loan forgiveness path for public servants remains as the courts left it in June: the restrictions are blocked, and the appeals against those rulings are gone.
The 22-state case will decide what comes next. Until it is resolved, borrowers keep the protections the June rulings preserved.