Michigan Attorney General Dana Nessel, leading a group of 22 attorneys general, has filed a lawsuit against the U.S. Department of Education (ED), a move aimed squarely at blocking new restrictions on the Public Service Loan Forgiveness (PSLF) program. The coalition contends that the program's new rule, which can disqualify employers based on the nebulous concept of a “substantial illegal purpose,” is a targeted strike at states and organizations out of favor with the current administration, as per the Michigan Department of Attorney General website. This action, Nessel argues, is a politicization of an initiative designed to forgive the federal student loans of public servants after a decade of service.
Since its inception in 2007, PSLF has served as a beacon for over a million Americans, compelling professionals to often overlooked careers in public service sectors such as education, health care, and law enforcement, yet the recently finalized guideline, set to take effect in July 2026, wields the power to declare entire agencies or organizations ineligible for PSLF if they're engaged in activities that support undocumented immigrants, provide gender-affirming health care to transgender youth, promote diversity, equity, and inclusion, or engage in political protest. "The Trump Administration has shown a troubling pattern of political retribution and unlawful targeting of those who dare to disagree with its policies," Nessel said on the Michigan Department of Attorney General, expressing a stern rebuke of these measures, recognizing their potential to undermine public service by complicating the viability of loan forgiveness as a benefit for those striving within such careers.
The 21 attorneys general behind this legal challenge to the Department of Education represent a swath of the United States—from the sun-kissed shores of California to the bustling urban terrain of New York—and they unite in their assertion that the rule introduces arbitrary criteria, branding it as both unlawful and an ideological weapon, Nessel and the coalition hold that PSLF guaranteed loan forgiveness without caveat of the employer's presumed purpose by statute and does not give the Department any authority to exclude participants based on the political winds.
Should this rule be enacted, it could herald a domino effect of deleterious impacts: once eligible public workers may find themselves unceremoniously stripped of promised benefits, states might reel from workforce shortages heightened turnover, and financial strains to maintain indispensable community services, a cascade of consequences which the coalition's lawsuit aims to staunchly avert. Furthermore, the rule’s "substantial illegal purpose" standard is being contested as arbitrary and capricious, Nessel and the coalition paint it as a thinly-veiled ploy granting the Department unprecedented sway to mark specific state policies for penalty while turning a blind eye to comparable federal activities, therefore the coalition is seeking a legal declaration of the rule’s illegality, its subsequent vacation and an injunction against its enforcement, according to the Michigan Department of Attorney General.
Among the states joining Michigan in this legal endeavor are Arizona, California, Connecticut, Delaware, the District of Columbia, Hawai‘i, Illinois, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Washington, and Wisconsin. A set of private plaintiffs and local governments have also filed a separate but similar lawsuit, aiming to chip away at the ED's rule before its stipulations can take root.
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