The US Justice Department has withdrawn two appeals challenging the Trump administration’s proposed restrictions on Public Service Loan Forgiveness. The rule remains blocked by federal court rulings, while a third related appeal involving 22 states and Washington, DC, is still pending.
The Washington Post reported that the Justice Department agreed to dismiss its appeals after two federal judges struck down the Education Department’s revised eligibility rules in June. The government did not publicly explain why it withdrew the two challenges.
The disputed rule would have allowed Education Secretary Linda McMahon to disqualify employers from the Public Service Loan Forgiveness (PSLF) program if the department determined that their activities served a “substantial illegal purpose.” The administration identified activities that included assisting undocumented immigrants and providing gender-transition care for minors. Critics also raised concerns about the potential effect on organizations involved in diversity, equity and inclusion initiatives.
Under the proposed restrictions, the Education Department could have removed a qualifying employer from the program, potentially affecting workers who had spent years making eligible student loan payments. The rule did not target individual borrowers directly, but changes to an employer’s status could have interrupted their progress toward forgiveness.
The legal dispute began after the administration finalized the rule in October 2025. More than 20 states and a coalition of nonprofit organizations, cities and unions challenged the changes, arguing that the department exceeded its authority and could impose restrictions based on an employer’s activities or political viewpoint.
Why the Trump Administration Abandoned Two PSLF Appeals
On June 30, 2026, federal judges in Massachusetts and Washington, DC, vacated the restrictions before they were scheduled to take effect. Judge Myong Joun in Massachusetts ruled that the department had exceeded its statutory authority and that the regulation was arbitrary and capricious. The ruling also found that the rule violated the First Amendment. Judge Amir Ali issued a separate decision against the department in Washington.
The Associated Press report on the Justice Department’s decision said the government filed agreements to dismiss two appeals on October 21. The agreements stated that each side would cover its own legal fees and costs.
The withdrawals cover the appeal in a case brought by civil rights groups and another involving nonprofit organizations, unions and cities. However, the administration appealed three rulings in August, and its challenge to the decision in the case brought by 22 states and Washington, DC, remains on the US Court of Appeals for the First Circuit’s docket.
The remaining case is significant because it represents the administration’s outstanding route to reversing the Massachusetts ruling. The government’s opening brief in that appeal was due November 4, 2026, as of October 22. Until that case is resolved or withdrawn, the wider legal dispute has not formally ended.
The Oregon Department of Justice’s litigation tracker records the earlier court ruling and subsequent appeal. The two dismissed appeals substantially weaken the administration’s attempt to restore the restrictions, but the pending case remains an important qualification.
Dan Zibel, chief counsel at Student Defense, which represented plaintiffs in one of the cases, praised the decision as a victory for public servants. The administration has not provided a detailed explanation for its change in legal strategy.
What the Decision Means for Student Loan Borrowers
For borrowers, the immediate position remains largely unchanged. The disputed restrictions are still vacated, so the Education Department cannot enforce the rule while the court orders remain in effect. The dismissal of two appeals does not create a new forgiveness benefit or automatically discharge anyone’s outstanding student loans.
The existing Public Service Loan Forgiveness program generally allows eligible federal Direct Loan borrowers to have their remaining balance forgiven after making 120 qualifying monthly payments while working full time for a qualifying government or nonprofit employer. The program was established by Congress in 2007 to encourage workers to pursue careers in public service.
More than 1.2 million borrowers had received PSLF forgiveness by April 2026, according to Education Department data cited by the Washington Post. Workers in public schools, government agencies, public hospitals, fire departments and eligible nonprofit organizations may qualify, depending on their employment and loan circumstances.
Borrowers pursuing forgiveness should continue tracking their qualifying payments and certifying their employment. Federal Student Aid recommends using its PSLF Help Tool to complete forms and check eligibility. The appeal withdrawals do not require borrowers to submit a new application solely because of the legal developments.
The case also comes as other changes to the federal student loan system create uncertainty for borrowers. The administration’s broader education policies have altered repayment options and borrowing limits, while concerns about rising defaults and collections have added pressure on households managing education debt. Those challenges have been reflected in recent reports on student loan defaults reaching $234 billion and the administration’s reported plans for tighter student loan collection measures.
For borrowers already working toward forgiveness, the key issue is maintaining eligibility under the rules currently in force. Workers should not assume that the government’s withdrawal from two appeals ends every possible legal challenge, but the dismissed cases make it less likely that the proposed restrictions will return.
The remaining First Circuit appeal will determine whether the administration continues its effort to revive the rule. Until then, the existing PSLF employer eligibility framework remains in place.