US states sued the Trump administration Monday over its new rule that would exclude employers from the Public Service Loan Forgiveness (PSLF) program that the Department of Education found to have a “substantial illegal purpose.”
The complaint, filed in the US District Court for the District of Massachusetts by 22 states, alleges that the Trump administration does not have the authority to exclude certain employers from PSLF under this law. According to the states, the only exception for government jobs is being a member of Congress, so excluding government jobs when the Department of Education asserts a substantial illegal purpose goes beyond the statute. The states further assert that the new rule is arbitrary and capricious under the Administrative Procedure Act.
PSLF is a student loan forgiveness program that cancels federal student debt after making payments for 10 years while working for an eligible employer. The College Cost Reduction and Access Act established PSLF and made public service jobs eligible for forgiveness. The law defines public service jobs as “a full-time job in. . . government (excluding time served as a member of Congress). . . or at an organization that is described in section 501(c)(3) of title 26 and exempt from taxation under section 501(a) of such title.”
The new rule prevents borrowers from receiving forgiveness if they work for a previously eligible employer that falls under the rule’s definition of having a substantial illegal purpose. The new rule defines “substantial illegal purpose” to include violations of certain federal immigration laws, supporting terrorism, child abuse, discrimination, and violations of state law. The states allege that the defined illegal activity is pretextual and meant to allow the administration to deter lawful activity that the administration disfavors by giving itself “unfettered discretion” to determine when an employer has engaged in such activity.
The new rule was introduced at the direction of Trump’s executive order in March, which instructed the Department of Education to create the rule. The Trump administration maintains that the rule is “commonsense reform.” It argues that supporting illegal activity is contrary to the public good that the PSLF program is meant to advance. It also emphasizes that the new rule creates a process to determine the eligibility of organizations.