On September 17, 2025, a coalition of 22 Democrat State Attorneys General filed a public comment Letter with the U.S. Department of Education opposing regulatory changes set forth in a Notice of Proposed Rulemaking (Docket ID ED–2025–OPE–00160) impacting the Public Service Loan Forgiveness (PSLF) program. The PSLF program currently authorizes the Department to cancel the Direct Loan balance of any borrower who has worked for at least 10 years for a "qualifying employer" – currently all U.S. federal, state and local government entities and 501(c)(3) entities.
The Proposed Rule would amend the definition of "qualifying
employer" to "not include organizations that engage in
activities that have a substantial illegal purpose" and would
define "substantial illegal purpose" as six specific
categories: (1) aiding or abetting violations of immigration laws;
(2) supporting terrorism; (3) engaging in "chemical and
surgical castration or mutilation of children"; (4) child
trafficking; (5) engaging in a pattern of aiding and abetting
illegal discrimination; or (6) engaging in a pattern of violating
State laws of trespassing, disorderly conduct, public nuisance,
vandalism, and obstruction of highways. Any employment at such
organization would be ineligible for PSLF under the proposed rule
change.
The Letter cites the bipartisan origins of the PSLF program, signed
into law by President George W. Bush, to relieve students choosing
and remaining in certain public service careers from burdensome
debt. The Letter notes concern about the Proposed Rule, if
implemented, resulting in uncertainty for borrowers who have
already committed to work in public service and future student
borrowers who now may be unable to choose public service due to the
public and private sector wage gap.
The AGs strongly oppose language in the Proposed Rule that could allow the Department to exclude government and nonprofit employees from the PSLF program if their employers engage in "substantially illegal activities" and warn that the rule's vague language could discourage public service careers.
One of the purposes of public comment submission in the Department's rulemaking process is to provide an opportunity for the Department to respond to stakeholder concerns. An inadequate agency response can lay the foundation for a future Constitutional and Administrative Procedure Act (APA) challenge to any Final Rule. The Letter sets forth several arguments that would likely form the basis of a future legal challenge by the coalition or others to any Final Rule, primarily based on the APA, the federal statute that governs the process for how agencies create and issue regulations. The Letter also cites potential First Amendment challenges based on lack of specificity with regard to the meaning of "substantially illegal activities" and impermissible content and viewpoint discrimination, as well as potential challenges grounded in Equal Protection, should the rule change disproportionately affect organizations serving specific communities or causes.
The state attorneys general for California, Colorado, Massachusetts, New York, Arizona, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Washington, and Wisconsin signed the Letter.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
