PSLF employer rule stays vacated as appeals dropped

The PSLF employer rule appeals The Public Service Loan Forgiveness employer rule remains vacated after the Justice Department dropped two of its three appeals on October 21, 2026. The rule would have let the Education Department disqualify employers it accused of illegal activity. A third appeal, led by states, is still live in the First Circuit, with the government's opening brief due on November 4, 2026. Public Service Loan Forgiveness is a federal programme that cancels a borrower's remaining federal student loan balance after 120 qualifying monthly payments, roughly ten years of full-time work for a government body, a school or an eligible non-profit organisation. The PSLF employer rule would have added a new screen to that programme, letting the Secretary of Education strike employers off the qualifying list for having what it called a substantial illegal purpose. Government lawyers filed joint stipulations dismissing two appeals over the PSLF employer rule, with both sides agreeing to end them. One was before the United States Court of Appeals for the District of Columbia Circuit, in the case brought by the Robert and Ethel Kennedy Human Rights Center and others. The second was case number 26-1972 in the First Circuit in Boston, brought by non-profits, unions and the cities of Albuquerque, Boston and Chicago. The stipulations gave no reason for the reversal, and each side agreed to bear its own fees and costs. ## What the PSLF employer rule would have done The PSLF employer rule was published as final regulations on October 31, 2025, with an effective date of July 1, 2026. It listed six categories of illegal activity that could cost an employer qualifying status under the PSLF employer rule: aiding and abetting violations of federal immigration laws; supporting terrorism or engaging in violence to obstruct or influence federal government policy; chemical or surgical castration or mutilation of children in violation of federal or state law; trafficking children to another state to free them from their lawful parents, in violation of federal or state law; a pattern of aiding illegal discrimination; and a pattern of violating state laws. No employer was ever determined ineligible under these provisions. Two federal district judges vacated the PSLF employer rule on June 30, 2026, one day before it took effect, so the screen never operated against anyone. Judge Myong J. Joun of the District of Massachusetts held the department had no authority to add a substantial illegal purpose requirement, and found the rule arbitrary and capricious and invalid on First Amendment grounds. Judge Amir H. Ali of the District of Columbia likewise held the rule in excess of the Secretary's authority under the Higher Education Act. Under the regulations, a borrower would have kept full credit for work before any determination against their employer under the PSLF employer rule. Payments made on or after July 1, 2026, would not have counted for months in which the employer was no longer eligible. An employer could have regained qualifying status ten years after a determination, or sooner under an approved corrective action plan. Each provision now has no legal effect, because the rule was struck down in full rather than narrowed. ## The appeal still live over the PSLF employer rule Case number 26-1973 in the First Circuit, brought by states and the District of Columbia, remains open, although some reports put the coalition at 21 states plus the District rather than 22 states. Because the government dropped the other two appeals the same day, several outlets reported that the states' appeal is likely to be dropped as well. That is an expectation, not a filing. Until the government either files its brief or withdraws, the case stays on the court's docket. Dan Zibel, chief counsel at Student Defense, called the outcome a significant victory for millions of Americans in public service careers. Diane Yentel, chief executive of the National Council of Nonprofits, said the court's order vacating the rule stands, and PSLF remains as Congress designed it. The Education Department did not immediately respond to a request for comment from the Associated Press, whose reporting CBS News carried. For borrowers in the loan forgiveness programme, the rules that governed before July 1, 2026, are in force, and the PSLF employer rule itself remains vacated while the states' appeal is pending. Qualifying employment still means full-time work for a government agency, a public school or college, or an eligible non-profit organisation. The department's PSLF Help Tool at studentaid.gov remains the official channel for checking employer eligibility.