A federal judge in Boston blocked on Tuesday a rule stripping public service workers of eligibility for federal student loan forgiveness if their employers have a "substantial illegal purpose".
U.S. district judge Myong Joun sided with Democratic-led states, cities and non-profits that argued the U.S. Department of Education's rule would allow it to target groups supporting immigration rights, transgender healthcare and other causes the Trump administration disfavors by disqualifying them from the Public Service Loan Forgiveness Program.
The Public Service Loan Forgiveness program allows borrowers to have their federal student loans forgiven after 10 years working for government or non-profit employers, and more than a million borrowers have received debt relief since Congress established it in 2007.
Donald Trump in a March 2025 executive order said the program has "misdirected tax dollars into activist organizations that not only fail to serve the public interest, but actually harm our national security and American values" and directed the education department to revise regulations to redefine what constitutes "public service" work.
The education department published a final rule in October that defined "substantial illegal purpose" as covering activities that include aiding what it defines as illegal immigration, supporting terrorism, engaging in illegal discrimination or participating in the "chemical and surgical castration or mutilation of children", which is the sort of language the administration often uses when referring to gender affirming care for transgender minors.
The plaintiffs sued in November to have the rule blocked from taking effect on July 1, arguing the law that created the forgiveness program did not grant the education department the discretion to create exceptions to eligibility for the program and that the agency lacked a rational basis for adopting the policy.
Tuesday's ruling followed another decision last week in which a judge in Washington, D.C., barred the education department from implementing a rule that would impose lower federal student loan limits for people pursuing graduate degrees in nursing and other healthcare-related fields.
Separately, the administration is ending the Biden-era SAVE repayment plan after a March 2026 federal court ruling found the program unconstitutional and passage of the One Big Beautiful Bill Act in 2025, a shift that will force more than seven million Americans to choose a different repayment option beginning Wednesday.
Borrowers on the SAVE plan will have 90 days to select a new repayment plan, and those with loans issued before July 1, 2026 will retain access to existing income-driven and fixed repayment plans, including income-based repayment, pay as you earn and income contingent repayment; the pay as you earn and income contingent repayment options are scheduled to be dismantled by the summer of 2028.
New borrowers taking out loans on or after July 1, 2026 will have access only to a repayment assistance plan, called RAP, and a new tiered standard repayment plan; under RAP monthly payments are calculated on a borrower's adjusted gross income, with payments ranging from 1% to 10% of AGI for those above a $10,000 threshold and $10 monthly for those below it, and loans forgiven after 30 years.
The tiered standard plan sets fixed payments that last between 10 and 25 years depending on the initial balance and requires payments of at least $50 a month, and some borrowers entering repayment may be automatically enrolled in that option.
Under Secretary of Education Nicholas Kent said the overhaul "simplifies the student debt system" and added, "For years, borrowers have been caught in a confusing cycle of uncertainty, but the Trump administration's policy is simple: if you take out a loan, you must pay it back."
Advocates expressed concerns about the transition. "People are not feeling good," Michele Zampini, associate vice-president of federal policy and advocacy at the Institute for College Access & Success, said, citing a September 2025 survey from Ticas and Data for Progress that found 48% of borrowers reported long wait times when contacting loan servicers. She said borrowers moving off SAVE have encountered roadblocks and that it is unclear how well prepared the department or servicers are to implement the change. A student quoted about the shift said it was causing reconsideration of plans for graduate school and other life choices.