Two federal judges blocked, just one day before it went into effect, a regulation promoted by President Donald Trump's administration that sought to limit access to the Public Service Loan Forgiveness Program (PSLF), a decision that represents a major setback for the administration's strategy to reform the federal student aid system.

The rulings were issued by Judges Myong Joun of the U.S. District Court in Massachusetts and Amir H. Ali of the U.S. District Court for the District of Columbia. Both concluded that the Department of Education exceeded the authority granted by Congress by modifying the program's eligibility criteria and, in Joun's case, that the rule also violates the protections of the First Amendment of the Constitution.

The regulation, published in October 2025, stated that organizations with a “substantial unlawful purpose” would no longer be eligible to participate in PSLF, a benefit that allows federal student loans to be canceled after ten years of service in government agencies or qualified nonprofit entities. More than a million Americans have received financial relief since Congress created the program in 2007.

Judges question the authority of the Department of Education

The Trump administration defended the measure by arguing that taxpayer money should not indirectly benefit organizations involved in activities such as terrorism, illegal immigration, human trafficking or medical procedures that the government considers contrary to its policies. However, the plaintiffs, a coalition made up of more than 20 states, the District of Columbia and various nonprofit organizations, argued that the rule used overly broad definitions that would allow it to exclude entities dedicated to the defense of immigrant rights, diversity programs or health care for transgender people.

In his ruling, Joun concluded that Congress never authorized the Department of Education to redefine what constitutes public service employment or to disqualify employers based on political criteria. The judge also noted that the regulation could discourage the free speech of nonprofit organizations by threatening them with losing access to the program.

The decision also reflects the new legal landscape following the Supreme Court's elimination of the Chevron doctrine in 2024, forcing courts to directly interpret the scope of powers granted by Congress to federal agencies.

Changes to the loan system continue

Although the restrictions on PSLF were suspended, other reforms promoted by the Trump administration began to be applied this July 1 as part of the so-called “One Big Beautiful Bill Act,” which significantly modifies the federal student loan system. Among the changes are new limits on the amounts that graduate students and parents can borrow through the Parent PLUS program, the phasing out of Graduate PLUS loans for new borrowers, and a lifetime debt cap for most recipients.

The legislation also reduces repayment options available to those taking out new federal loans, introduces the new Repayment Assistance Plan (RAP), and sets in motion the phaseout of the SAVE plan, implemented during the Joe Biden administration. In addition, it tightens some requirements to access Pell Grants, although it expands the benefit for certain short-term job training programs.

As the Department of Education considers next steps following the court rulings, the court decisions keep the operation of the public service worker forgiveness program unchanged and represent one of the main legal obstacles facing the Trump administration as it seeks to redefine federal student loan policy.