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Additional Information
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Incident Nature:
Lawsuit
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Incident Political Orientation:
Not Clear -
Incident Responses:
Litigation
Title IX or other federal statute
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Incident Status:
In litigation Federal District Court
- Did not involve Speech Codes
Summary
On November 3, 2025, the National Council of Nonprofits and other plaintiffs filed a lawsuit against U.S. Secretary of Education Linda McMahon and the U.S. Department of Education, challenging new regulations governing the Public Service Loan Forgiveness (PSLF) program. PSLF provides federal student loan forgiveness to borrowers who make 120 qualifying payments while working in public service. The regulations, issued pursuant to a March 7, 2025, executive order from President Donald Trump, allow the Secretary to disqualify otherwise eligible employers if their organizations engage in activities determined to have a “substantial illegal purpose.” The rule identifies activities including aiding or abetting violations of federal immigration laws, supporting terrorism, providing certain gender-affirming care to minors, trafficking children, and engaging in a pattern of violating state laws.
The plaintiffs alleged that the rule exceeded the Department’s statutory authority, was arbitrary and capricious under the Administrative Procedure Act, and violated the First Amendment. They argued that the rule gives the Secretary broad discretion to disqualify nonprofit and public-service employers, including educational institutions, based on their activities and could place their employees at risk of losing access to PSLF. The plaintiffs also argued that the rule could penalize protected speech and association by allowing the government to consider an organization’s advocacy and other activities when determining whether it remained eligible to participate in the program.
On June 30, 2026, the court ruled for the plaintiffs and vacated the final rule. The court held that the Department exceeded its statutory authority by allowing the Secretary to disqualify otherwise eligible employers based on a determination that they had a “substantial illegal purpose.” The court also found the rule arbitrary and capricious, noting that the Department expected fewer than 10 employers to be affected annually and had not adequately explained the need for the rule. The court further found that the rule did not provide sufficiently clear guidance about what conduct could result in an employer’s disqualification.
The court also held that the rule violated the First Amendment because it discriminated on the basis of viewpoint. The court concluded that the rule placed organizations engaged in certain activities under a “cloud of uncertainty” and found that the record showed the rule had “chilled” protected speech. On August 27, 2026, the Department appealed the decision. A related lawsuit, Robert F. Kennedy Center for Justice and Human Rights v. McMahon, was filed in the U.S. District Court for the District of Columbia on November 4, 2025, challenging the same PSLF rule. That court likewise vacated the rule on June 30, 2026, and the Department appealed on August 27, 2026. Both matters remain ongoing.
