Local Governments, Labor Unions, and Nonprofit Organizations Triumph in Challenge to Administration’s Weaponization of Public Service Loan Forgiveness

WASHINGTON – A federal court has ordered the administration to stop its unlawful rewriting of the Public Service Loan Forgiveness (PSLF) program as a way of silencing local governments and nonprofit organizations that do work that goes against the administration’s political agenda. The ruling comes in National Council of Nonprofits et al. v. McMahon, a case brought by a broad coalition of more than a dozen cities, labor unions, and nonprofit organizations against the U.S. Department of Education. The case sought to stop a new rule that would allow the Secretary of Education to disqualify government and nonprofit employers that disagree with the administration’s policies from a program intended to support borrowers working in public service jobs. 

Plaintiffs in the case include City of Albuquerque, City of Boston, 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 DC, National Association of Social Workers, National Council of Nonprofits, Oasis Legal Services, American Federation of Teachers, American Federation of State, County and Municipal Employees (AFSCME), and National Education Association. The coalition is represented by Democracy Forward and Protect Borrowers in this matter; the County of Santa Clara and City and County of San Francisco represent themselves.

Quotes from plaintiffs included in the coalition are available here.  

AFT President Randi Weingarten said: “Today’s ruling shows that imposing an ideological litmus test on millions of public servants and their employers is antithetical to American values and contrary to the statute at hand. For years, the AFT has fought to ensure the promise of Public Service Loan Forgiveness was a promise kept. PSLF was created by a Republican president and Democratic senators to help attract and retain teachers, nurses, firefighters and many more who’ve dedicated their careers to helping others. The current president decided instead to attack borrowers’ livelihoods if they didn't agree with the government—an illegal assault on millions of Americans who placed their faith in PSLF’s bipartisan promise, only to see it cruelly ripped away.”

The court wrote that: “Congress unequivocally prescribed the requirements for PSLF-eligible public service jobs. The statute does not vest any discretionary authority in the Secretary to disqualify employers (and consequently borrowers) or to alter unambiguous requirements set forth in… the repayment provision or the statutory definition of ‘public service jobs. Consequently, the Final Rule is unlawful because it permits the Secretary to disqualify statutorily eligible employers upon determining that they have a ‘substantial illegal purpose.’ The Final Rule plainly contradicts the unambiguous text of the PSLF Statute and exceeds the scope of the Department’s authority because Congress does not require such a hurdle and did not specifically instruct the Department to impose it.”

“The Final Rule is contrary to law and promulgated in excess of statutory authority, is arbitrary and capricious, and violates the First Amendment. I therefore hold it unlawful and set it aside. The Final Rule is vacated,” the court concluded.

The legal team on this case includes Sarah Goetz, Victoria Nugent, Simon Brewer, Jennifer Fountain Connolly, and Robin Thurston from Democracy Forward and Persis Yu and Winston Berkman-Breen from Protect Borrowers.

Read today’s opinion here and learn more about the case here.