President Donald Trump suffered another courtroom setback Tuesday after two federal judges appointed by former President Joe Biden blocked his administration’s effort to tighten eligibility for a popular student loan forgiveness program.
The rulings prevent the Department of Education from enforcing new restrictions that were scheduled to take effect Wednesday, marking another legal obstacle for the administration as it works to reshape federal education policy.
The dispute centers on the Public Service Loan Forgiveness (PSLF) program, which allows qualifying public service employees to have their remaining federal student loan balances forgiven after making 10 years of eligible payments.
Trump Administration Wanted Tougher Standards
The Trump administration argued the program had expanded far beyond its original purpose and proposed new rules designed to prevent taxpayer-funded loan forgiveness from benefiting organizations engaged in activities the administration considers illegal or harmful.
Under the new policy, employees could lose eligibility for PSLF if their employer was found to have a “substantial illegal purpose.”
Administration officials said the goal was to ensure taxpayer dollars support legitimate public service—not organizations involved in illegal immigration, terrorism, human trafficking, or medical gender-transition procedures for minors.
The changes were part of President Trump’s broader effort to reform federal spending and tighten oversight of government programs.
Biden-Appointed Judges Put Rule On Hold
Just one day before the new regulations were set to begin, two federal judges issued separate rulings blocking the policy.
In Massachusetts, U.S. District Judge Myong Joun ruled that the Department of Education likely exceeded its legal authority in adopting the new restrictions. The judge also concluded the rule could raise First Amendment concerns by discouraging protected speech.
In a separate case, U.S. District Judge Amir Ali in Washington, D.C., also blocked the policy after several nonprofit organizations challenged the regulations.
The lawsuits were backed by more than 20 Democrat-led states along with advocacy groups that argued the administration was improperly targeting organizations involved in immigration advocacy and transgender-related healthcare.
Education Department Defends The Policy
Despite the legal setback, Trump administration officials stood firmly behind the rule.
Under Secretary of Education Nicholas Kent said the policy was intended to protect taxpayers and preserve the original mission of the loan forgiveness program.
“The Public Service Loan Forgiveness Program is intended to support Americans who serve the public good, not to subsidize organizations that engage in terrorism, facilitate illegal immigration, or support the mutilation of children,” Kent said.
The Department of Education said it is reviewing the court rulings and evaluating its legal options.
What Is Public Service Loan Forgiveness?
Congress created the Public Service Loan Forgiveness program in 2007 to encourage Americans to pursue careers in government and nonprofit public service.
Borrowers who meet the program’s requirements—including making 120 qualifying monthly payments while working for an eligible employer—can have the remainder of their federal student loans forgiven.
Federal figures show that over one million borrowers have had their student loan balances forgiven through the program.
Trump’s Broader Student Loan Reform Effort
President Trump has repeatedly argued that federal student loan forgiveness programs have been expanded beyond what Congress originally intended.
Last year, he signed an executive order directing the Department of Education to tighten eligibility standards and prevent organizations involved in unlawful activities from benefiting through the PSLF program.
The administration’s final rule listed activities such as facilitating illegal immigration, supporting terrorism or human trafficking, and promoting chemical or surgical gender-transition procedures for minors as grounds for disqualification.
Another Legal Battle Ahead
For now, the existing Public Service Loan Forgiveness rules remain in effect while the lawsuits continue through the federal court system.
The case is expected to become another closely watched legal fight over the Trump administration’s authority to reshape federal student loan programs and determine which organizations should qualify for taxpayer-funded benefits.
The outcome could have significant implications not only for borrowers but also for the future direction of federal education policy under the Trump administration.