PSLF Loan Forgiveness Stands as Education Department Drops Appeal

The United States Education Department has dropped its legal fight to restrict Public Service Loan Forgiveness, leaving court rulings in place that protect the program for the teachers, nurses, firefighters, and nonprofit workers who are counting on it. The Justice Department withdrew its appeals on October 21 against two federal court rulings that had blocked the new restrictions.

The disputed rule, finalized in October 2025, would have let the Education Department exclude government and nonprofit employers it deemed to have a "substantial illegal purpose." Borrowers do not qualify for the program on their own. Their employer's status decides whether their payments count, so an employer exclusion could have erased years of progress toward forgiveness for workers who never changed jobs or missed a payment.

What the courts decided

Federal judges struck the rule down in rulings issued in June. The courts found that the department had gone beyond its authority and raised First Amendment concerns about a standard that turned on the government's view of an employer's activities. The rule had been set to take effect on July 1, 2026, and never did. By withdrawing the appeals, the administration leaves those rulings standing and ends the case brought by a coalition of cities, counties, nonprofits, and labor unions.

San Francisco City Attorney David Chiu, whose office helped lead that coalition, welcomed the end of the case on October 22. "Millions of people in our country struggle under crushing student loan debt, so we're grateful loan forgiveness will remain available to public servants who dedicated their careers to bettering our communities," Chiu said. "This victory ensures the Public Service Loan Forgiveness program is here to stay and can continue to function as Congress intended."

What borrowers should know

Public Service Loan Forgiveness cancels the remaining balance on eligible federal student loans after a borrower makes 120 qualifying monthly payments, about ten years of payments, while working full time for a qualifying government or nonprofit employer. More than 2.3 million borrowers are pursuing forgiveness under the program, according to Education Department data.

For those borrowers, the practical position is unchanged: the existing eligibility rules stay in force, payments that counted before still count, and no employer faces removal under the dropped standard. Borrowers should still certify their employment regularly and keep their own payment records, because the program's paperwork, not this court fight, is where most applications run into trouble.

The administration did not explain why it withdrew the appeals. What is clear is the result: a rule that could have removed whole employers from the program is gone, and the June rulings are now the final word in these cases.