PSLF update: Education Department drops its last appeal, states say, ending the fight over the employer rule

The last open court fight over the Trump administration’s Public Service Loan Forgiveness (PSLF) employer rule appears to be over. State attorneys general in California, Washington and Maryland announced on Oct. 22 and 23 that the U.S. Department of Education dropped its appeal of the ruling the states won in Massachusetts federal court, leaving the rule struck down.

That follows Wednesday’s news that the government had dropped two other appeals over the same rule. The states’ case was the one still pending, so its dismissal is what the attorneys general are calling a final win.

This article is general information, not financial or legal advice. Check your own situation with your loan servicer or StudentAid.gov.

What changed today?

The new development is the states’ case, Commonwealth of Massachusetts v. U.S. Department of Education. A coalition of 22 attorneys general sued in November 2025 and won a decision from the U.S. District Court for the District of Massachusetts in June 2026 that vacated the rule.

According to the California, Washington and Maryland attorneys general, the administration has now dropped its appeal of that decision. “By dropping its appeal of the decision, the Trump Administration concedes the case, leaving the District Court’s ruling in place,” California Attorney General Rob Bonta’s office said.

NASFAA, the financial aid administrators’ association, reported on Oct. 23 that the government had moved to dismiss two of its three appeals and that the third was “assumed” to follow. If it does, NASFAA said, the original ruling vacating the rule becomes final. The state announcements say that last step has now happened. We have not seen a court order or a statement from the Education Department confirming it.

What did the rule try to do?

The rule would have let the Education Department deny PSLF eligibility to workers whose government or nonprofit employers it found to have a “substantial illegal purpose.” The states said the standard was vague and aimed at legal but politically disfavored work, including legal services for immigrants, gender-affirming care for minors, diversity, equity and inclusion programs, and civil protest.

In its June order, the court held the rule was contrary to law, arbitrary and capricious, beyond the department’s authority and a violation of the First Amendment, according to the attorneys general.

What the states are saying

• California AG Rob Bonta: “The Trump Administration tried and failed to turn a bipartisan promise into a political weapon.”
• Washington AG Nick Brown: “Our coalition successfully blocked this illegal attempt by the federal administration to withhold loan forgiveness for ideological and unlawful reasons.”
• Maryland AG Anthony G. Brown: “By defeating the unlawful rule, we are ensuring that no one is punished because their employer’s mission does not match the President’s politics.”

What it means for PSLF borrowers

For borrowers, the practical answer is the same as it was this week: the existing PSLF rules stay in place. PSLF forgives the remaining federal student loans of people who work in qualifying public service jobs and make 10 years of qualifying payments.

NASFAA noted two caveats:

1. The vacated language may still appear in the Code of Federal Regulations until the department acts, but it is not enforceable.
2. The department could try new rulemaking, though the court’s findings on the law and the First Amendment would “significantly constrain” any new version, and a near-copy would likely be challenged.

Basic steps still apply: keep certifying your employment, stay on a qualifying repayment plan and keep records of your payments.

FAQ

Earlier coverage: PSLF update: Trump administration drops two appeals over rule to cut off some employers (Oct 22)