Student Loan Forgiveness Update, Trump Administration Drops Two PSLF Appeals, but One Case Remains

The Trump administration has dropped two federal appeals seeking to revive restrictions on the Public Service Loan Forgiveness (PSLF) program, a significant development for government and nonprofit workers who count on the program.

On October 21, 2026, the Justice Department filed agreements to dismiss two appeals after federal judges struck down the Education Department’s 2025 rule that would have let the government disqualify certain employers from PSLF under a “substantial illegal purpose” standard. The rule remains vacated, but a third appeal, in a case brought by a coalition of states, was still pending as of the latest reporting.

This does not mean the government has forgiven every public service worker’s student loans. PSLF still has its requirements: qualifying federal Direct Loans, eligible full-time employment and 120 qualifying monthly payments under an accepted repayment plan. The practical significance is that the administration has abandoned two legal efforts to restore the disputed employer restrictions.

Student Loan Forgiveness Update: Quick Facts

Key detail	What borrowers should know
Latest development	The administration dropped two appeals on October 21, 2026
Program involved	Public Service Loan Forgiveness (PSLF)
Original rule	Education Department final rule announced October 30, 2025 and published October 31, 2025 (90 FR 48966)
Planned effective date	July 1, 2026
Lower-court rulings	Two federal district courts vacated the rule on June 30, 2026
Appeals dismissed	Robert F. Kennedy Center for Justice and Human Rights v. McMahon (D.C. Circuit No. 26-5308) and National Council of Nonprofits v. McMahon (First Circuit No. 26-1972)
Appeal still pending	Commonwealth of Massachusetts v. U.S. Department of Education (First Circuit No. 26-1973), as of the latest reporting
Automatic forgiveness	No
New claim form or settlement	No
Action required solely because of this news	None

What Happened on October 21, 2026?

The Department of Justice had appealed the court decisions that invalidated the Education Department’s employer-eligibility rule. On October 21, it filed joint stipulations to dismiss two of those appeals. The agreements said each side would bear its own fees and costs. The administration did not publicly explain why it dropped the two appeals, according to the Associated Press.

Such stipulated dismissals are allowed by agreement of the parties under Federal Rule of Appellate Procedure 42(b). Because the government is dropping its challenge, the June 30 judgments in those two cases stand and are no longer under attack in those appeals.

The administration has not announced a new blanket forgiveness program, and no settlement requiring payments to borrowers was announced.

Which PSLF Appeals Were Dropped, and Which Is Still Pending?

Three appeals arose from lawsuits challenging the rule.

1. Robert F. Kennedy Center for Justice and Human Rights v. McMahon (dismissed)

Filed in the U.S. District Court for the District of Columbia as Civil Action No. 1:25-cv-03860-AHA. The government appealed the June 30, 2026 ruling to the D.C. Circuit (No. 26-5308). Judge Amir H. Ali granted summary judgment to the plaintiffs and vacated the rule, concluding that the Education Department had exceeded its statutory authority. Press reports identify Student Defense as one of the plaintiffs in this litigation.

2. National Council of Nonprofits v. McMahon (dismissed)

First Circuit No. 26-1972. The case was brought by the National Council of Nonprofits and other nonprofit, local-government and employee organizations in the District of Massachusetts. On June 30, 2026, the court vacated the rule, and the government’s appeal was among the two withdrawn.

3. Commonwealth of Massachusetts v. U.S. Department of Education (still pending)

First Circuit No. 26-1973. The suit was brought by Massachusetts and a coalition of more than 20 states, the District of Columbia and other public entities. This was the remaining appeal as of the latest reporting on October 21 to 22, 2026. The government had not dismissed it, and its opening brief was reported to be due November 4. It would be inaccurate to say all the appeals are over. Check the current docket before relying on later developments.

What Was the Trump Administration’s PSLF Rule?

The Education Department announced its final rule on October 30, 2025, published it in the Federal Register on October 31, and set an effective date of July 1, 2026. It followed a March 2025 executive order directing changes to PSLF employer eligibility.

The rule would have allowed the Secretary to decide that an otherwise qualifying employer had a “substantial illegal purpose” and was no longer eligible. The categories of conduct it listed included certain activity relating to federal immigration laws, support for terrorism, specified conduct involving children, patterns of aiding and abetting illegal discrimination, and patterns of violating state tort laws. Press reports said an employer could be excluded for a period of at least ten years, and that individual borrowers had no direct way to challenge the employer decision. The Department described the rule as protecting taxpayers from funding organizations that engage in unlawful activity.

Critics argued the rule gave the Department too much discretion and could reach organizations providing lawful services to immigrants, supporting transgender youth, running diversity programs or engaging in advocacy the administration opposes. The central legal question was whether the Department could add this broad disqualification standard to a program whose eligible employers Congress defined by statute.

Why Did the Federal Courts Strike Down the Rule?

On June 30, 2026, one day before the rule would have taken effect, the District of Massachusetts and the District of Columbia ruled against the Education Department. In the Massachusetts litigation, Judge Myong J. Joun concluded that the rule was contrary to law, exceeded the Secretary’s statutory authority, was arbitrary and capricious and violated the First Amendment. Judge Ali separately vacated the rule in the D.C. case. In the Massachusetts ruling, the court noted that more than 100 supporting briefs were filed for the challengers and none for the government, according to press reports.

The courts focused on the gap between the categories of public service Congress authorized in the statute and the added exclusion criteria imposed by regulation, and on the vagueness of the “substantial illegal purpose” standard and its potential effect on protected speech.

The Legal Framework

• The statute. Congress created PSLF in the College Cost Reduction and Access Act of 2007, codified at 20 U.S.C. § 1087e(m). It provides for cancellation of the remaining balance of eligible Direct Loans after 120 qualifying monthly payments made while employed full-time in a “public service job.” The statute defines public service jobs by category, including government employment, work for 501(c)(3) tax-exempt organizations and certain other nonprofits providing specified public services, and it does not list a “substantial illegal purpose” disqualifier. The implementing regulation is 34 C.F.R. § 685.219.
• The Administrative Procedure Act (APA). A court must set aside agency action that is arbitrary, capricious, contrary to law or in excess of statutory authority (5 U.S.C. § 706(2)). “Vacatur” under the APA sets the rule aside, which is different from an injunction limited to the parties.
• No deference on statutory meaning. After Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), courts decide for themselves what a statute means rather than deferring to an agency’s reasonable interpretation, which made it harder for the Department to defend adding eligibility criteria Congress had not listed.
• First Amendment. The challengers argued that disqualifying employers based on the content of their lawful work and advocacy amounts to viewpoint discrimination and an unconstitutional condition on a public benefit. Judge Joun agreed.

The rulings did not end the Department’s authority to administer PSLF. They addressed the legality of this specific rule.

What Does This Mean for Student Loan Borrowers?

The challenged restrictions remain blocked. The dropped appeals make it less likely that those two rulings will be reversed in those proceedings, but the third appeal is still pending, so the litigation has not fully ended. The dismissals do not create a new forgiveness benefit, do not discharge anyone’s balance and do not change the ordinary eligibility rules.

Borrowers should keep confirming their employment and payment records through Federal Student Aid. They should not switch jobs, change repayment plans, stop required payments or assume forgiveness based on headlines.

Who Can Qualify for Public Service Loan Forgiveness?

PSLF generally applies to eligible federal Direct Loans held by borrowers who work full-time for a qualifying employer and make 120 qualifying monthly payments under an accepted repayment plan. Qualifying employers include federal, state, local and tribal government agencies and eligible nonprofits. Not every nonprofit qualifies automatically, and eligibility depends on loan type, employment and payment history. PSLF forgiveness is excluded from federal gross income under 26 U.S.C. § 108(f)(1).

Does the Ruling Mean Every Nonprofit Stays Eligible?

No. The courts invalidated the specific 2025 “substantial illegal purpose” rule. Employers must still qualify under the program’s ordinary standards, and any later lawful change could affect eligibility.

Do Borrowers Need a New Form?

No new claim form or settlement application was created. The Education Department published a September 22, 2026 Federal Register notice saying it was removing the disputed employer attestation from the PSLF form to comply with the June 30 court order and was making no other changes at that time. Borrowers should use the official PSLF form and Help Tool.

What PSLF Borrowers Should Do Now

1. Check your payment count on StudentAid.gov under your loan and PSLF information.
2. Confirm your employer’s eligibility with the PSLF Help Tool and employer search, and follow the official process if its status is unclear.
3. Certify employment regularly, at least annually and whenever you change employers, and keep copies of completed forms and certifications.
4. Keep making required payments while you work toward forgiveness.
5. Keep records of servicing problems, including payment histories, certifications and notices, if your count looks wrong.
6. Watch the remaining appeal through official court records and Federal Student Aid announcements.

How This Differs From Other Student Loan Lawsuits

The PSLF employer-rule litigation is separate from other student loan disputes, including servicing and payment-count class actions, litigation over discharged loans that allegedly still appear on credit reports, and challenges involving the SAVE repayment plan. The October 21 dismissals do not resolve those disputes, create a settlement or establish a universal right to loan cancellation.

Timeline: The PSLF Employer-Rule Legal Fight

Date	What happened
March 2025	President Trump issues an executive order directing changes to PSLF employer eligibility
October 30 to 31, 2025	Education Department announces and publishes the final rule
November 3, 2025	The states’ lawsuit and a separate suit by cities, nonprofits and unions are filed
June 30, 2026	Federal judges vacate the rule in Massachusetts and D.C.
July 1, 2026	The rule’s planned effective date passes while it is blocked
August to September 2026	The administration pursues appeals in the three cases
September 22, 2026	Education Department publishes notice removing the disputed attestation from the PSLF form
October 21, 2026	The government dismisses the D.C. Circuit appeal and the nonprofits’ First Circuit appeal
October 22, 2026	The states’ First Circuit appeal remains pending in the latest reporting

Frequently Asked Questions

Did Trump cancel the Public Service Loan Forgiveness program?

No. The October 21 announcement concerned appeals over an employer-eligibility rule. PSLF continues under its requirements.

Does this mean forgiveness is guaranteed for teachers and government workers?

No. Public-service employment alone does not cancel a loan. Loan type, qualifying employment, repayment requirements and the 120-payment threshold still apply.

Can a nonprofit employer still be excluded from PSLF?

The 2025 rule was vacated by the courts, but employers must still meet the program’s ordinary standards. Verify employer status through Federal Student Aid.

Why did the government drop the two appeals?

The dismissal agreements gave no public explanation, and speculation about motive is not supported by the record.

Is the PSLF lawsuit over?

Not entirely. The government dropped two appeals, but the Massachusetts-led appeal (First Circuit No. 26-1973) remained pending in the latest reports.

Is there a claim form or settlement payment?

No. This was litigation over the legality of a rule, not a settlement program.

Could the restrictions return?

The two dismissed appeals will not proceed, but the states’ appeal remained pending, and a later court order or lawful agency action could change the legal landscape. Rely on current court orders and Federal Student Aid guidance.

Where can borrowers check eligibility?

On the Federal Student Aid PSLF page and Help Tool, reviewing loan type, employer, qualifying payment count and application status.

Related Reading on AllAboutLawyer.com

• MOHELA Class Action, Borrowers Sue Over Overcharges, Ignored Discharges, and PSLF Delays
• Student Loan Forgiveness Credit Report Lawsuit, Were You Affected? Woods v. U.S. Department of Education
• SAVE Plan Lawsuit 2026: What 7 Million Borrowers Must Do Now

Sources

1. Associated Press, “Trump administration drops legal fight to overhaul student loan forgiveness program,” October 21, 2026: https://apnews.com/article/public-service-loan-forgiveness-trump-debt-0e25878fbf2b6742131a93260164c63b
2. Robert F. Kennedy Center for Justice and Human Rights v. McMahon, No. 1:25-cv-03860-AHA (D.D.C.), June 30, 2026 memorandum opinion: https://docs.justia.com/cases/federal/district-courts/district-of-columbia/dcdce/1%3A2025cv03860/286525/47
3. Commonwealth of Massachusetts v. U.S. Department of Education, No. 1:25-cv-13244 (D. Mass.); First Circuit No. 26-1973. Case information: https://clearinghouse.net/case/47296/
4. U.S. Department of Education, final PSLF rule, 90 FR 48966 (October 31, 2025): https://www.govinfo.gov/content/pkg/FR-2025-10-31/pdf/2025-19729.pdf
5. U.S. Department of Education, October 30, 2025 announcement: https://www.ed.gov/about/news/press-release/us-department-of-education-announces-final-rule-public-service-loan-forgiveness-protect-american-taxpayers
6. U.S. Department of Education, September 22, 2026 Federal Register notice on the PSLF form: https://www.govinfo.gov/content/pkg/FR-2026-09-22/html/2026-19368.htm
7. Federal Student Aid, Public Service Loan Forgiveness: https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service
8. 20 U.S.C. § 1087e(m): https://www.govinfo.gov/content/pkg/USCODE-2024-title20/html/USCODE-2024-title20-chap28-subchapIV-partD-sec1087e.htm
9. 34 C.F.R. § 685.219; 5 U.S.C. § 706; 26 U.S.C. § 108(f)(1); Fed. R. App. P. 42(b): https://www.ecfr.gov and https://uscode.house.gov
10. Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024)
11. Press coverage of the June 30, 2026 rulings: Education Week, FindLaw, state attorney general press releases

Disclaimer: This article provides general legal and student-loan information, not individualized legal, tax or financial advice. PSLF eligibility depends on the borrower’s loans, qualifying employment, repayment history and the rules applicable to the account. Check official Federal Student Aid guidance and current court records for updates. Consult a licensed attorney or qualified advisor about your specific situation.