Attorney General Raúl Torrez, along with a coalition of 22 attorneys general, has filed a lawsuit against the U.S. Department of Education (ED). The legal action challenges a new federal rule that limits eligibility for the Public Service Loan Forgiveness (PSLF) program. This program allows government and nonprofit employees to have their federal student loans forgiven after ten years of service.
The attorneys general argue that the rule could disqualify certain state and local governments or nonprofit organizations from being eligible employers for PSLF if deemed by the federal government to have engaged in actions with a "substantial illegal purpose." On October 31, ED finalized this rule, which will take effect in July 2026. It grants ED the authority to declare entire agencies or organizations ineligible based on activities such as supporting undocumented immigrants.
Attorney General Torrez said, "The administration’s attempt to ‘cherry-pick’ which public servants are eligible for student loan forgiveness—despite years of dedicated service—is a clear effort to force state compliance with its political agenda." He emphasized that these individuals serve in essential roles like healthcare and education with the expectation of qualifying for this program.
Established by Congress in 2007, the PSLF program aims to incentivize careers in public service by forgiving remaining federal student loan debt after ten years of qualifying service and consistent payments. It has helped over one million public servants pursue careers they might not otherwise afford. For state governments, PSLF is crucial for recruiting and retaining professionals in vital fields.
The coalition warns that the new rule could lead to staffing shortages and increased costs as public workers may lose PSLF eligibility unexpectedly. They argue that ED's discretion under this rule is unlawful since it contradicts the PSLF statute guaranteeing loan forgiveness for full-time public service workers without exceptions based on ideology.
Joining Attorney General Torrez are attorneys general from New York, Massachusetts, California, Colorado, Arizona, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, Oregon, Rhode Island, Vermont, Washington, Wisconsin, and the District of Columbia. A group of private plaintiffs and local governments also plans to file a lawsuit today challenging the new rule.
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