Trump administration drops its appeal in Illinois-led challenge to public service loan forgiveness rule

The Trump administration has dropped its appeal of a federal court ruling that struck down a U.S. Department of Education rule limiting which employers qualify for the Public Service Loan Forgiveness program, ending a lawsuit brought by Illinois and other states.^{1, 2}

The program forgives the remaining federal student loan debt of government and nonprofit workers after 10 years of qualifying public service and payments.^{1, 2} The administration withdrew its appeal on Oct. 22, Attorney General Kwame Raoul’s office said.¹

What the rule would have done

The rule would have allowed the administration to declare state governments, hospitals, schools and nonprofit organizations ineligible for the program based on their support for immigrants, gender-affirming health care or diversity programs, according to Raoul’s office.¹

President Donald Trump ordered in 2025 that workers could be disqualified if Education Secretary Linda McMahon found their employer had a “substantial illegal purpose,” FOX 32 reported.² Trump has said activist organizations have exploited the program, the station reported.²

The court fight

Raoul and a coalition of attorneys general sued in November 2025.¹ In June 2026, the U.S. District Court for the District of Massachusetts vacated the rule, finding it contrary to law, arbitrary and capricious, beyond the department’s legal authority and in violation of the First Amendment, according to the attorney general’s office.¹

A second federal judge, in Washington, D.C., also blocked the rule in a case brought by four nonprofit groups, FOX 32 reported.² The administration dropped its appeals in both cases, according to the station.²

Raoul said in a statement that the president’s attempt to punish states he disagrees with politically “was illegal, and I am pleased with our win in this case.”¹ Dan Zibel, an attorney for the advocacy group Student Defense, called the rule “anti-democratic and unlawful from the start,” FOX 32 reported.²

Besides Illinois, the coalition includes the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Washington and Wisconsin.¹

The program

Congress created Public Service Loan Forgiveness in 2007.¹ It has helped more than 1 million public servants pursue their careers, Raoul’s office said.¹ The Education Department has processed 3.7 million applications since June 2024, and about $87.6 billion in loans has been discharged through the program in that time, according to federal data cited by FOX 32.²

Eligible employers include government agencies at every level, public schools and universities, the military, public hospitals and nonprofit groups, the station reported.²