New York Attorney General Letitia James stands silently during a press conference on October 21, 2025 in New York City.
Michael M. Santiago | Getty Images
New York Attorney General Letitia James and more than a dozen other state attorneys general on Monday sued the Trump administration over its new rule limiting eligibility for a popular student loan forgiveness program.
The AGs’ lawsuit was prompted by the U.S. Department of Education’s final rule, released last week, that changes the definition of a “qualifying employer” under the Public Service Loan Forgiveness program. The rule excludes certain organizations “that engage in unlawful activities” such as “supporting terrorism and aiding and abetting illegal immigration,” according to an Education Department statement.
PSLF, signed into law in 2007 by George W. Bush, offers debt cancellation after a decade to borrowers who work for non-profits and the government.
“Public Service Loan Forgiveness was created as a promise to teachers, nurses, firefighters, and social workers that their service to our communities would be honored,” said Attorney General James in a statement.
“Instead, this administration has created a political loyalty test disguised as a regulation,” James said.
In an email to CNBC, Under Secretary of Education Nicholas Kent called the rule “commonsense reform.”
More than 40 million Americans hold student loans, and the outstanding debt exceeds $1.6 trillion. Over 9 million borrowers may be eligible for PSLF, according to a 2022 estimate from Protect Borrowers, a nonprofit focused on student loans.
President Donald Trump has been a vocal critic of the Biden administration’s student loan forgiveness efforts, which included making it easier to qualify for PSLF. Under President Joe Biden, more than 1 million people had their debts cleared under the program, according to a 2024 White House fact sheet.
The lawsuit was brought by attorneys general of Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Washington, Wisconsin and the District of Columbia.
A coalition of cities across the U.S, labor unions and nonprofit organizations also filed a lawsuit on Monday against the Trump administration over its PSLF rule.
“The Trump Administration’s illegal actions threaten to make higher education even more expensive for Boston’s teachers, first responders, and civil servants,” said Boston Mayor Michelle Wu in a statement.
