HARMON CURRAN NONPROFIT LAW BLOG
Federal Government Abandons Appeal in Public Service Loan Forgiveness Cases, Leaves in Place Decisions Vacating Rule on “Substantial Illegal Purpose”
The Trump administration has dropped its appeal in two cases regarding a Department of Education (“ED”) final rule that would have laid the groundwork to permit ED to disqualify any nonprofit employer described in section 501(c)(3) of the Internal Revenue Code from the Public Service Loan Forgiveness program if ED determined the nonprofit employer had a “substantial illegal purpose.” Several parties sued to challenge the final rule on statutory and constitutional grounds. In summer of 2026, federal district courts in Massachusetts and the District of Columbia ruled that the ED exceeded its statutory authority in promulgating the final rule, creating new definitions and placing new burdens on employers beyond the scope of what Congress intended. The federal government appealed those rulings. See more information about both lawsuits in our previous post, Federal Courts Vacate Department of Education’s Final Rule on Public Service Loan Forgiveness Program. The administration’s withdrawal of its appeals means that the final regulations will not be implemented, and nonprofits will continue to be eligible employers for PSLF purposes.
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