Key Points
- The Education Department dropped two of its three appeals over its PSLF employer rule on October 21, 2026.
- The appeal in the case brought by 22 states and D.C. is still pending, though it appears likely the government will drop that one too.
- The PSLF employer on substantially illegal conduct rule remains vacated, and borrowers don’t need to take any new steps.
The Education Department has dropped two of its three appeals over a rule that would have let it strip Public Service Loan Forgiveness eligibility from employers it accused of illegal activity. On October 21, 2026, Justice Department lawyers filed joint stipulations to dismiss the appeals in the D.C. Circuit and in a First Circuit case brought by nonprofits.
The PSLF employer rule remains vacated under two June 30 court rulings.
The government appealed all three rulings in August, and its appeal in a companion case brought by 22 states and D.C. is still on the First Circuit’s docket. No dismissal had been filed in that case as of October 21, and the government’s first brief there is due November 4. Because the government dropped the other two appeals on the same day, it appears likely the states’ appeal will be dropped as well.
The stipulations give no reason for the reversal, and each side agreed to pay its own fees and costs. For borrowers working toward Public Service Loan Forgiveness, the chance of the rule coming back now rests on a single remaining appeal, and is slim.
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Which PSLF Appeals Did The Government Drop?
The government dropped its appeals in two of the three cases challenging the substantially illegal conduct PSLF rule. Here’s where each case in the legal fight over PSLF eligibility stands:
- Robert F. Kennedy Center for Justice and Human Rights v. McMahon, No. 26-5308 in the D.C. Circuit: appeal dropped.
- National Council of Nonprofits v. McMahon, No. 26-1972 in the First Circuit: appeal dropped. Nonprofits, unions, and cities brought this case.
- Commonwealth of Massachusetts v. U.S. Department of Education, No. 26-1973 in the First Circuit: appeal still pending. The government’s opening brief is due November 4.
Student Defense, which represents the plaintiffs in the D.C. case with Public Citizen, posted the joint stipulation in that case (PDF File). Chief Counsel Dan Zibel called the outcome a win for public servants counting on student loan forgiveness.
“The Trump administration’s attempt to weaponize public service loan forgiveness against organizations it disagrees with was anti-democratic and unlawful from the start. This is a significant victory for millions of Americans who have dedicated their careers to public service.”
Dan Zibel, Chief Counsel, Student Defense
@thecollegeinvestor The U.S. dropped its appeals in two of the three PSLF employer rule cases, paving the way to keep PSLF in-tact as it was. #studentloans #studentloanforgiveness #pslf ♬ original sound – The College Investor
What Would The PSLF Employer Rule Have Done?
The rule would have let the Education Department disqualify employers it found had a “substantial illegal purpose.” The Department listed activities such as aiding violations of federal immigration law and illegal discrimination. Borrowers at a disqualified employer would have stopped earning qualifying PSLF payments after the determination date.
The Department published the final rule on October 31, 2025, and lawsuits followed within days. The rule grew out of a 2025 executive order on PSLF that targeted the same categories of employers.
However, a day before the rule was set to take effect, judges in each of the three cases all struck down the rule. About a month later, the Department of Education filed their intent to appeal the rulings, which they have since dropped.
Where Does The Massachusetts Case Stand?
The Massachusetts ruling still vacates the rule nationwide, and the states’ appeal is now the government’s only path to reviving it. Judge Myong J. Joun ruled on June 30 that the rule was contrary to law, arbitrary and capricious, and a First Amendment violation.
If the government drops the states’ appeal, Judge Joun’s ruling becomes final and nothing changes with the current PSLF employer rules.
| Date | What Happened |
|---|---|
| October 31, 2025 | Final PSLF employer rule published |
| November 3–4, 2025 | Nonprofits, unions, cities, and 22 states plus D.C. sue |
| June 30, 2026 | Courts in Massachusetts and D.C. vacate the rule |
| July 1, 2026 | Original effective date passes with no rule in force |
| August 27, 2026 | Government appeals all three rulings |
| October 21, 2026 | Government drops two of three appeals |
| November 4, 2026 | Brief due in the states’ appeal |
What Does The Dismissal Mean For PSLF Borrowers?
Nothing changes in how PSLF works day to day, and the employer rule can’t be enforced while it remains vacated. The existing rules for qualifying PSLF employers stay in place. Government agencies and 501(c)(3) nonprofits continue to qualify, along with the other employer types the program already covered.
For workers at immigration legal aid groups, health systems, and advocacy nonprofits, this rule could have jeopardized their eligibility to receive loan forgiveness. Those borrowers were at the center of the debate over who could lose PSLF access, and some were weighing job changes to protect their progress.
What Should PSLF Borrowers Do Now?
- Keep certifying employment. Submit your PSLF form at least once a year and after any job change, as laid out in our PSLF checklist.
- Stay put if your job was the worry. Your employer can’t be disqualified under the vacated rule, so review how PSLF qualification works before making a career move.
- Stay on a qualifying plan. The Repayment Assistance Plan counts toward PSLF for new and existing borrowers, along with IBR, PAYE, and ICR.
FAQs
Is The PSLF Employer Rule In Effect?
No. Courts vacated the PSLF employer rule on June 30, 2026, and the government dropped two of its three appeals on October 21. The rule stays vacated unless the First Circuit reverses the states’ case.
What Happens Next In The Massachusetts Case?
The government’s opening brief in the states’ appeal is due November 4, 2026. If the government files a dismissal instead, the June 30 rulings become final. We’ll update our PSLF lawsuit coverage when the docket changes.
Editor: Colin Graves
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Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.