OLYMPIA, WA – Washington Attorney General Nick Brown announced Monday that the state, alongside 21 others, has filed a lawsuit against the U.S. Department of Education over newly adopted restrictions to the Public Service Loan Forgiveness (PSLF) program.
The states argue that the federal rule, finalized on October 31, unlawfully limits eligibility for PSLF by allowing the Department of Education to disqualify certain public and nonprofit employers. The rule grants the department authority to label organizations as ineligible if they are deemed to have a “substantial illegal purpose,” a term that coalition members say is overly broad and could be applied to disfavor specific state policies or social programs.
The PSLF program, established by Congress in 2007, forgives the remaining balance on federal student loans after ten years of qualifying payments for individuals working full-time in government or nonprofit roles. According to the lawsuit, the new rule could lead to thousands of public employees losing eligibility through no fault of their own, resulting in staffing shortages and increased costs for essential services.
The Department of Education has projected that the rule could bring in an additional $1.5 billion in loan payments over the next decade from borrowers who would no longer qualify for forgiveness. Between October 2021 and January 2025, more than 23,000 Washington borrowers had over $1.6 million in student loans discharged through the PSLF program.
The lawsuit, led by the attorneys general of New York, Massachusetts, California, and Colorado, calls the new rule “unlawful, arbitrary, and capricious.” The coalition is seeking to have the rule vacated and to bar the Department of Education from enforcing or implementing it. States joining the case include Arizona, Connecticut, Delaware, Hawaiʻi, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Wisconsin, and the District of Columbia.
The rule is scheduled to take effect in July 2026. A separate group of private plaintiffs and local governments also filed suit Monday challenging the same regulation.
