U.S. Department of Education’s unlawful new rule threatens bipartisan student debt relief program for Americans with careers in public service
SAN FRANCISCO, CA (November 3, 2025) — San Francisco City Attorney David Chiu and Santa Clara County Counsel Tony LoPresti announced San Francisco and Santa Clara County have joined a broad coalition of cities, labor unions, and nonprofit organizations in filing a lawsuit today against the U.S. Department of Education (ED). The suit charges the Federal Administration with illegally hijacking the Public Service Loan Forgiveness (PSLF) program to punish governments and non-profit organizations that do work the Administration does not like.
The new rule will allow the Secretary of Education to illegally disqualify public service employers that do not align themselves with the Trump Administration’s anti-immigrant, anti-LGBTQIA+, and anti-equity policy preferences. The change would unfairly punish borrowers for the lawful actions of their employers and break a decades-old bipartisan Congressional promise to provide debt relief to those who choose to dedicate their careers to public service.
“Millions of people across our country are struggling under crushing student loan debt. Congress made a bipartisan commitment to relieve debt for Americans who make a career of serving their communities,” said City Attorney Chiu. “The Federal Administration cannot step into the role of Congress, break that commitment, and punish workers counting on this debt relief simply because the Administration disagrees with the entirely lawful policies of certain employers.”
“The Public Service Loan Forgiveness program helps ensure that people who dedicate their careers to serving our communities can achieve financial stability,” said Treasurer José Cisneros. “For many public employees, this program makes it possible to pursue meaningful work in government and nonprofits while managing the burden of student debt. Protecting PSLF is essential to supporting a strong, committed public service workforce.”
“This Federal Administration has been hell-bent on punishing dedicated public servants, from their massive unlawful reductions to the federal workforce to their latest attempt to dismantle public service loan forgiveness for thousands of nurses, teachers, first responders, and other government workers,” said Santa Clara County Counsel Tony LoPresti. “Public service loan forgiveness has played a critical role in recruiting and retaining some of the best and brightest to careers in government service, and this attempt at politicizing eligibility is deeply dangerous and patently illegal. The County of Santa Clara employs more than 24,000 dedicated public servants, and we will continue to defend their rights, and the rights of all government employees, in court.”
Background
Congress created the Public Service Loan Forgiveness program in 2007 to provide federal student loan debt relief to people working in public service in all levels of government or at a non-profit organization. PSLF forgives the remaining balance on direct federal loans after a participant makes 120 qualifying payments while working full-time for a public service employer.
San Francisco employs approximately 34,000 people across its departments and relies on PSLF to recruit and retain talented workers in a region with a high cost of living. The City’s Office of Financial Empowerment supports PSLF access and hosted workshops in 2023 that registered more than 2,100 public service employees from San Francisco and other eligible employers.
The new PSLF rule, issued on November 1, would allow the Secretary of Education to disqualify government and nonprofit employers that disagree with the Federal Administration’s policies. This would give the Administration a tool to attack sanctuary jurisdictions, immigrant rights groups, healthcare providers that offer gender affirming care, schools, colleges, and universities, and employers committed to equal opportunity employment. This effort to weaponize PSLF will have a chilling effect on the entire public service workforce and will unfairly punish workers for the entirely lawful policies of their employers.
The lawsuit alleges that the new PSLF rule is arbitrary and capricious, and a blatant violation of the Administrative Procedure Act and the Higher Education Act passed by Congress, which categorically provides that government and 501(c)(3) nonprofit employers are PSLF-eligible employers. By denying debt relief to those employed at organizations the Federal Administration dislikes, the rule will deprive government and non-profit employers of highly qualified individuals to do work benefitting those in need across the country. The lawsuit asks the court to strike down the rule and safeguard the PSLF program as Congress intended—a bipartisan promise to those who choose to serve their communities, regardless of politics.
San Francisco and Santa Clara County join the City of Albuquerque, City of Boston, City of Chicago, Amica Center for Immigrant Rights, Coalition for Humane Immigrant Rights, Legal Aid DC, National Association of Social Workers, National Council of Nonprofits, Oasis Legal Services, American Federation of Teachers, American Federation of State, County and Municipal Employees, and National Education Association as Plaintiffs in the lawsuit. The coalition is represented by Protect Borrowers and Democracy Forward in this matter. San Francisco and Santa Clara County are representing themselves.
The case is National Council of Nonprofits, et al. v. Linda McMahon, et al., U.S. District Court for the District of Massachusetts, Case No. 1:25-cv-13242. A copy of the complaint is available here.
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