A program that worked on paper

The Public Service Loan Forgiveness program was created by the College Cost Reduction and Access Act of 2007. The promise was straightforward: federal student loan borrowers who spent ten years working full-time for a qualifying public-service employer (federal, state, local, or qualifying nonprofit) and who made 120 monthly payments under an income-driven repayment plan would have their remaining federal student loan balance discharged.

For the first decade of the program’s existence, it largely didn’t work.

The 2018 numbers were the visible failure point. As borrowers who had enrolled in 2007-2008 reached their ten-year mark, the program denied their applications at a rate well over 95%. The denial reasons were technical: wrong loan type (FFEL loans, the older federal loan program, didn’t qualify); wrong repayment plan; missing employment certification; payment count discrepancies the servicer couldn’t reconcile.

The borrowers who had relied on the program — teachers, nurses, social workers, public defenders, military service members — found that the federal commitment they had organized their careers around was not, in practice, being honored.

What changed in 2021

The Biden administration announced a Limited PSLF Waiver in October 2021, followed by broader administrative reforms in 2022-2023. The waiver, in effect, suspended the most rigid technical denials and counted previously rejected periods of payment toward forgiveness.

The numbers shifted dramatically. Through the waiver and subsequent administrative reforms:

• Over 1 million borrowers have had their loans discharged through PSLF since the reforms.
• Total discharged debt now exceeds $80 billion.
• The typical discharged borrower had been working in qualifying public service for 12-15 years.

This is by far the largest implementation of PSLF since its creation.

What was actually wrong

Three structural problems explained the pre-2021 failure rate:

1. Loan type denials. Borrowers had taken out FFEL loans (the predecessor program before 2010). FFEL loans were not PSLF-eligible by statute. Borrowers could consolidate into Direct Loans to qualify, but the consolidation process and its consequences for prior payments were not adequately communicated by federal student aid servicers. Many borrowers did not learn until they applied for forgiveness that their loans were the wrong type.

2. Payment-count discrepancies. Servicers maintained payment counts that frequently differed from borrowers’ own records. Certifying employment annually was supposed to address this; in practice, certifications were delayed, lost, or processed incorrectly. Borrowers reaching their ten-year mark often discovered they were “missing” 6-18 months of qualifying payments.

3. Repayment-plan denials. Borrowers had sometimes been on standard repayment plans rather than income-driven ones, or had switched between plans in ways that broke the qualifying-payment count. Servicers were inconsistent in counseling borrowers toward IDR.

The 2021-2023 reforms addressed all three structurally. FedLoan Servicing was replaced with MOHELA. Account adjustment was applied to correct historical payment counts. The IDR account adjustment recounted payments for IDR-related balance forgiveness as well as PSLF.

The 2026 rule: a new line of dispute

The reforms above repaired how PSLF processes a borrower’s claim. They did not change who counts as a qualifying employer — that definition (federal, state, local government, and qualifying 501(c)(3) nonprofits) has been stable since 2007. A 2026 regulation changes it for the first time.

On March 7, 2025, the Trump administration issued Executive Order 14235, directing the Department of Education to revise the PSLF qualifying-employer definition. The Department published a final rule on October 31, 2025. It takes effect July 1, 2026.

The rule adds a new disqualifier. An otherwise-qualifying government or nonprofit employer can be excluded from PSLF if the Education Secretary determines that it engages in activities with a “substantial illegal purpose.” The rule’s examples include aiding violations of federal immigration law, supporting terrorism or political violence, facilitating child abuse or trafficking, repeated illegal discrimination, and patterns of state-law violations such as trespassing or public disorder.

The structural concern is not the listed categories in the abstract — it is who applies them. The rule places the determination with the Education Secretary rather than a court, and the disqualifying conduct is the employer’s, not the borrower’s. A teacher, nurse, or public defender who has personally done qualifying work for ten years could lose forgiveness because the Secretary has judged their city or nonprofit to fall on the wrong side of a contested definition. That converts a payment-and-employment program into a channel for executive judgment about which public employers are legitimate.

The litigation

The rule is being challenged on multiple fronts:

• A coalition of 21 states and the District of Columbia sued, arguing the rule exceeds the Department’s statutory authority.
• The cities of Boston, Chicago, San Francisco, and Albuquerque, joined by AFSCME and the two largest national teachers’ unions (the NEA and the AFT), filed a separate suit. It argues the rule violates federal law and the First Amendment by letting the Department withhold debt relief from employees of public institutions the administration disfavors.
• A third suit was brought by nonprofit organizations expecting to be affected.

The First Amendment theory is the central one: a rule that disqualifies an employer for “supporting” disfavored activity, applied at the Secretary’s discretion, can function as a penalty on protected speech and association by the employer and, indirectly, on the public workers it employs.

Income-driven repayment: the SAVE plan is gone

PSLF requires payment under an income-driven repayment (IDR) plan, so the state of IDR is part of PSLF’s foundation. That foundation narrowed in 2026. The SAVE plan — the most generous IDR option, introduced in 2023 — was eliminated: a December 2025 settlement between the Trump administration and Missouri, followed by an Eighth Circuit order in March 2026 directing the lower court to vacate the SAVE rule. Borrowers on SAVE must move to an older IDR plan. PSLF eligibility itself does not depend on SAVE specifically — other IDR plans still qualify — but the menu of affordable repayment options that make a ten-year path realistic has gotten smaller.

What’s settled and what isn’t

It is worth being precise, because the headline (“PSLF in court”) can mislead.

Settled and functioning. Borrowers who have completed, or are completing, ten years at an employer that qualifies under the longstanding definition are still receiving discharges. The 2021-2023 operational repairs remain in place. PSLF is not “broken” again.

Newly contested. The qualifying-employer definition. From July 1, 2026, absent a court order, the Secretary gains authority to disqualify specific employers — and a borrower’s standing can turn on a determination made about their employer, after the fact, by a political appointee.

What to watch

• The July 1, 2026 effective date. Whether courts enjoin the rule, in whole or in part, before it takes effect.
• The three lawsuits. The 21-state suit, the cities-and-unions suit, and the nonprofit suit — particularly the First Amendment and statutory-authority rulings.
• Any list of disqualified employers. If and when the Department names specific employers, the practical scope of the rule becomes visible.
• Statutory codification proposals. The pre-2026 fight — locking the 2021-2023 operational reforms and the historical qualifying-employer definition into statute — is now more urgent, not less. A definition fixed in law is harder to revise by rule.
• IDR availability. With SAVE gone, the cost and availability of the remaining income-driven plans that make a ten-year PSLF path affordable.

Bottom line

PSLF was a federal commitment that for a decade was largely unmet. The 2021-2023 reforms changed that, and for past and current borrowers under qualifying employers the program still works. What changed in 2026 is the contest over who qualifies. A new rule, effective July 1, 2026, lets the Education Secretary disqualify employers deemed to have a “substantial illegal purpose” — and cities, unions, and a coalition of states have sued, arguing the rule reaches beyond the Department’s authority and into protected speech. PSLF is no longer a settled success story. It is a functioning program with a newly politicized boundary, and the work now is keeping that boundary defined by statute and ten years of qualifying work rather than by executive discretion.