Judge blocks Trump rule on student loan forgiveness program

Investing.com -- A federal judge stopped the Trump administration from enforcing a new rule that would have removed public service workers from federal student loan forgiveness eligibility if their employers were found to have a "substantial illegal purpose."

U.S. District Judge Myong Joun in Boston ruled in favor of Democratic-led states, cities and nonprofits on Tuesday. The groups argued the U.S. Department of Education's rule would allow targeting of organizations supporting immigration rights, transgender healthcare and other causes opposed by the Trump administration through disqualification from the Public Service Loan Forgiveness Program.

The program permits borrowers to have their federal student loans forgiven after 10 years of employment with government or nonprofit organizations. More than 1 million borrowers have received debt relief since Congress created the program in 2007.

Trump issued an executive order in March 2025 stating the program has "misdirected tax dollars into activist organizations that not only fail to serve the public interest, but actually harm our national security and American values."

The order instructed the Education Department to revise program regulations to redefine "public service" work and exclude organizations engaging in activities with a "substantial illegal purpose."

The Education Department published a final rule in October that defined "substantial illegal purpose" as covering activities including aiding illegal immigration, supporting terrorism, engaging in illegal discrimination, and participating in the "chemical and surgical castration or mutilation of children."

The plaintiffs filed suit in November to block the rule before its scheduled July 1 effective date. They argued the rule was designed to target causes the administration opposes and groups supporting immigrants' rights, transgender healthcare, diversity initiatives and political protest.

The lawsuit stated that the law creating the forgiveness program did not give the Education Department authority to create eligibility exceptions and that the agency lacked a rational basis for the policy.

Last Wednesday, another judge in Washington, D.C., blocked the Education Department from implementing a separate rule that would have imposed lower federal student loan limits for people pursuing graduate degrees in nursing and other healthcare-related fields.

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