By Nate Raymond
BOSTON, June 30 (Reuters) - A federal judge on Tuesday blocked U.S. President Donald Trump's administration from implementing a new rule stripping public service workers of eligibility for federal student loan forgiveness if it deems their employers to have a "substantial illegal purpose."
U.S. District Judge Myong Joun in Boston sided with Democratic-led states, cities and nonprofits that argued the U.S. Department of Education's rule would allow it to target groups supporting immigration
rights, transgender healthcare and other causes the Trump administration disfavors by disqualifying them from the Public Service Loan Forgiveness Program.
That program allows borrowers to have their federal student loans forgiven after 10 years working for government or nonprofit employers. More than 1 million borrowers have received debt relief since Congress established it in 2007.
Trump in a March 2025 executive order claimed the program has "misdirected tax dollars into activist organizations that not only fail to serve the public interest, but actually harm our national security and American values."
His order directed the Education Department to revise regulations governing the program to redefine what constitutes "public service" work to exclude organizations that engage in activities that have a "substantial illegal purpose."
The Education Department did so with a final rule that it published in October that defined "substantial illegal purpose" as covering activities that include aiding illegal immigration; supporting terrorism; engaging in illegal discrimination; and participating in the "chemical and surgical castration or mutilation of children."
The plaintiffs sued in November in order to have the rule blocked from taking effect on July 1, saying it was clearly designed to target causes the administration disfavors and groups that support immigrants' rights, transgender healthcare, diversity initiatives and political protest.
Their lawsuit argued that the law that created the forgiveness program did not grant the Education Department the discretion to create exceptions to eligibility for the program and that the agency lacked a rational basis for adopting the policy.
Tuesday's ruling marked the second legal defeat for the Trump administration's efforts to remake the federal student loan system in the last week.
On Wednesday, another judge in Washington, D.C., barred the Education Department from implementing a new rule that would impose lower federal student loan limits for people pursuing graduate degrees in nursing and other healthcare-related fields.
(Reporting by Nate Raymond in Boston; Editing by Chizu Nomiyama)
