States, unions sue Trump administration over loan forgiveness rule

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(The Center Square) – A coalition of states led by New York Attorney General Letitia James and another coalition of teacher unions filed lawsuits against the Trump administration, alleging it violated federal law by excluding certain organizations from a student loan forgiveness program.

Under the Public Service Loan Forgiveness, the administration’s updated rule disqualifies employers that it says have “a substantial illegal purpose." The administration has applied that phrase to organizations that provide gender-affirming care, support immigrants, or promote diversity, equity and inclusion.

Now two lawsuits are challenging that rule. 

The lawsuit brought by the attorneys general of 22 jurisdictions says that the Public Service Loan Forgiveness is “a decades-old bipartisan Congressional promise to support those who choose to dedicate their careers to public service.”

Created to help government and nonprofit workers, the program was intended to forgive student loans for employees considered to be serving the public.

In October, the administration said it was “rightsizing the program to ensure that PSLF benefits go only to borrowers employed by organizations that genuinely serve the public,” according to the U.S. Department of Education. 

James responded in a post on X, accusing the administration of “weaponizing” the loan forgiveness program “illegally.” 

Her office said the new rule could deem entire state governments, hospitals, schools and nonprofits ineligible if the federal government determines they engage in activities the administration opposes.

“The coalition argues that the sweeping new rule is unlawful, politically motivated, and targeted to punish states and organizations that the administration does not like,” James’ office said in a statement. 

Currently 40 million Americans hold student loans, and the debt is over $1.6 trillion. 

American Federation of Teachers President Randi Weingarten, who is leading the union coalition, noted the program’s bipartisan origins, saying it “was created by a Republican president and Democratic senators to help attract and retain teachers, nurses, firefighters and so many others who’ve dedicated their careers to helping others.” 

She said the administration is imposing “an ideological litmus test on millions of public servants and their employers that’s antithetical to American values and contrary to the statute at hand. “

It is an “illegal attack” on those relying on the program, she added.

The New York Attorney General's Office and the U.S. Department of Education did not respond to The Center Square's request for comment. 

Joining James in filing this lawsuit are the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Washington, Wisconsin and the District of Columbia. 

Joining the American Federation of Teachers in this lawsuit are the National Council of Nonprofits, city of Boston, city of Albuquerque, city of Chicago, city and county of San Francisco, county of Santa Clara, Amica Center for Immigrant Rights, Coalition for Humane Immigrant Rights, Legal Aid Society of the District Of Columbia, Oasis Legal Services, American Federation of State, County and Municipal Employees, National Education Association, and National Association of Social Workers.