November 3, 2025 - OAKLAND — California Attorney General Rob Bonta today co-led a coalition of 22 attorneys general in filing a lawsuit challenging new U.S. Department of Education regulations that could exclude people with federal student loans from Public Service Loan Forgiveness (PSLF) eligibility based on whether their employers engage in actions that the Trump Administration deems to have a “substantial illegal purpose.” The rule threatens PSLF eligibility for organizations that are engaged in important and legal activities, such as providing legal services to immigrants, providing gender-affirming care to minors, participating in diversity, equity, and inclusion (DEI) initiatives, or engaging in civil protest and the right to assembly. As of 2024, more than 81,000 Californians have received over $6 billion in PSLF forgiveness. Last month, Attorney General Bonta led a multistate coalition in sending a letter to the Department opposing a proposed version of the rule. In the lawsuit filed today in the U.S. District Court for the District of Massachusetts, the attorneys general ask the court to declare the now final rule unlawful, vacate it, and bar the Department from enforcing or implementing it. 

“Millions of Americans shaped their lives, made long-term career decisions, and took on deep financial burdens based on the promise that, if they dedicated their lives to public service and made student loan payments for 10 years, their government would support them. Now, the Trump Administration is pulling the rug from under hardworking Americans who absolutely deserve what they were promised,” said Attorney General Bonta. “The Public Service Loan Forgiveness program is a Bush-era, bipartisan-backed effort that encourages generations of young people to build careers in public service. Make no mistake: This is the latest example of the Trump Administration’s weaponization of the federal government to go after people it does not agree with, all the while betraying and eroding the very institutions that uphold our democracy. We’ll see the President in court.”

In 2007, a bipartisan Congress under the Bush Administration created PSLF to encourage college graduates to work in the public sector, where salaries are often lower than at for-profit companies. The PSLF program enables public servants who work in eligible government and nonprofit roles to have their qualifying federal student loans forgiven after 10 years of qualifying service and payments. It helps public service employers recruit and retain skilled workers who might otherwise be forced to turn to private sector employment to afford to pay their student loans. Many California state employees are eligible for, actively pursuing, or have already benefited from PSLF as a means of managing the significant student debt that they incurred in preparing for skilled public service careers.

The U.S. Department of Education’s rule would enable the Secretary of Education to unilaterally disqualify employers from PSLF if she deems them to have a “substantial illegal purpose.” The vagueness of the rule could empower the Trump Administration to target politically disfavored conduct and may threaten PSLF eligibility for organizations that are engaged in longstanding and legal activities. The rule creates uncertainty as to who is an eligible employer and will deter student borrowers from entering public service. The resulting uncertainty of the rule will undercut the state’s ability to recruit and retain skilled employees.  

This rule is the latest attempt by the Trump Administration to harness the power of the federal government to target conduct and entities, states, and individuals it does not like — many of whom are at the forefront of critical sectors, processes, and programs that serve to uphold democratic norms. Within the last 10 months, the Trump Administration has used its power to:

•  Prosecute people it views as political enemies;
•  Threaten media that criticizes President Trump;
•  Go after law firms that represent people who President Trump perceives as enemies (here, here, and here); and
•  Target critical transportation, homeland security, and public safety and victim services funding for states engaging in conduct it doesn’t like. 

In the complaint filed today, the attorneys general argue the Department’s rule is contrary to law and in excess of statutory authority under the Administrative Procedure Act (APA), as the Higher Education Act defines eligible employers to include government agencies and 501(c)(3) non-profits with no exceptions and provides no grant of discretion to the Secretary of Education to determine otherwise. The attorneys general also argue the rule is arbitrary and capricious under the APA, as the rule fails to set out clear standards for when a government or nonprofit organization has a “substantial illegal purpose,” including by failing to define key elements of the inquiry, failing to describe the evidence ED may use to make such a determination, and failing to set out clear procedures to provide notice and due process to employers found to exist for a substantially illegal purpose.

Attorney General Bonta is co-leading today's lawsuit alongside the attorneys general of Colorado, Massachusetts, and New York. They are joined by the attorneys general of Arizona, Connecticut, Delaware, the District of Columbia, Hawai’i, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Washington, and Wisconsin. 

A copy of the complaint can be found here.

Source: CA. DOJ