States argue rule punishes states and nonprofits that Trump admin doesn’t like
By Mia Maldonado, Oregon Capital Chronicle
A coalition of Democratic states are suing the U.S. Department of Education to stop new eligibility restrictions for the program that allows student loan forgiveness for government and nonprofit employees after 10 years of service.
The Public Service Loan Forgiveness program became law after President George W. Bush signed the College Cost Reduction and Access Act of 2007, which was meant to encourage Americans to enter public service by promising to forgive their loans after 10 years of payments. Between June 2024 and July 2025, nearly 3 million Americans had applied for the loan forgiveness program, records from the U.S. Department of Education show.
President Donald Trump in March signed an executive order calling for the Department of Education to change its rules for the program and begin denying loan forgiveness to agencies and nonprofits that help immigrants living in the U.S. without proper documentation, provide gender-affirming health care to transgender youth and promote diversity and inclusion.
The Department of Education on Friday finalized the new rules. They are set to take effect in July 2026.
The coalition of states is arguing that the rule is unlawful and targeted to punish states and organizations that the Trump administration doesn’t like. They argue the program doesn’t give the U.S. Department of Education the ability to pick and choose who qualifies for loan forgiveness based on ideology.
Oregon Attorney General Dan Rayfield said the state and many of its agencies employ many workers with student debt, and the public service loan forgiveness program is an essential tool to recruit and retain workers for the state of Oregon.
“This is not only illegal, but also deeply troubling,” Rayfield said in a statement. “It gives the federal government the power to decide which public servants ‘count’ based on politics. Oregonians who dedicate their careers to public service — teachers, nurses, firefighters and countless others — shouldn’t lose their benefits because of who they work for or what their community stands for.”
Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, Rhode Island, Vermont, Washington, Wisconsin, and the District of Columbia also joined the lawsuit. A group of private plaintiffs and local governments is also filing a lawsuit on Monday to block the implementation of the new rule.
This is at least Oregon’s 44th lawsuit against the Trump administration.
U.S. Sens. Ron Wyden and Jeff Merkley, both Democrats representing Oregon, also introduced legislation Monday to pause student loan payments for federal workers when a federal government shutdown lasts longer than two weeks.
“Folks who sign up to be public servants shouldn’t have to worry about choosing between putting food on the table for their families and making student loan payments,” Merkley said in a statement.
Mia Maldonado covers Oregon and state legislature with a focus on social services for Oregon Capital Chronicle. She started her career in journalism with Oregon Capital Chronicle’s sister outlet in Idaho, the Idaho Capital Sun.
