Two federal judges in different courts have blocked the Trump administration’s attempt to deny employees of nonprofits that oppose the Trump administration’s political agenda access to a program through which they could avoid having to pay off all of their student loans. Both issued their judgments on June 30, 2026.

As a law professor who studies the nonprofit sector, I believe that both judges made the right decision because the historical strength of the nonprofit sector in the U.S. is its independence from government control. The First Amendment requires that laws governing nonprofits be neutral, and that no administration can punish an organization merely because its actions or views are at odds with the White House.

Forgiving student debt owed by public service workers

Congress approved the legislation that created the Public Service Loan Forgiveness program in 2007. This program cancels the remaining balance on federal student loans after eligible borrowers consistently make payments on their student debt for 10 years.

Only borrowers with public service jobs may participate and be eligible to have some of their student loan balance canceled. That is, they need to work for the government at any level, including public schools, or at any charitable nonprofit.

One of the program’s goals was to encourage young Americans, especially those with significant student debt, to do jobs that serve the public good but pay less than what they might earn in the private sector.

The government does not cancel any student loan debt until the Education Department verifies that eligible borrowers have met all requirements, including a decade of steady payments from public school teachers, government officials and employees of nonprofits of all kinds – such as food banks and museums.

But that promise of debt relief for borrowers at some nonprofits was jeopardized prior to these two rulings.

To date, the program has canceled more than US$87 billion in student loans for nearly 1.2 million Americans. On average, borrowers have seen about $74,000 in debt erased.

Trump administration’s attempt to revise the program

President Donald Trump issued an executive order on March 7, 2025, directing the Department of Education to change who can be eligible for public service loan forgiveness.

In the order, he complained that some of the program’s participants may have worked for organizations that “actually harm our society and American values, sometimes through criminal means.” The order does not name any of those nonprofits, but it named some examples: aiding immigrants, treating minors’ gender dysphoria, advancing diversity, equity and inclusion goals, and helping to organize left-wing protests.

Trump said he wanted the government to refuse to forgive loan balances of borrowers who work for those employers. The order itself was not legally binding, but it guided the drafting of a new regulation the Education Department issued on Oct. 31, 2025. The regulation ordered the exclusion from the debt forgiveness program of employers that “engage in specific enumerated illegal activities such that they have a substantial illegal purpose.”

The phrase “substantial illegal purpose” comes out of nonprofit law; organizations with an illegal purpose can’t be tax-exempt charities. But the doctrine has been employed in very limited circumstances in the past, and the government has never developed rules to ensure that it is not abused.

Instead of developing those rules, the regulation identifies specific issues that the Trump administration objects to and has treated as high priorities.

Doing those activities would disqualify an employer from participation in the program under that regulation, if the Education Department determined that those organizations employed illegal means to advance their goals.

A group of 22 state attorneys general and a coalition of nonprofits, municipal governments and labor unions filed separate lawsuits on Nov. 3, 2025, to block the regulation. Those lawsuits were later combined. Another group of nonprofits filed a similar lawsuit the next day.

Why the judges struck Trump’s revised rules

On the day before the new rule was set to go into effect, , in Massachusetts, and , in Washington, D.C., struck it down – preventing the Department of Education from implementing it.

More than a year after Trump’s executive order, both judges found that the statute that Congress passed was unambiguous about which employers qualified for the program: all nonprofits with 501(c)(3) tax-exempt status. And because the statute was so clearly written, the Education Department has no authority to change the eligibility criteria to exclude particular organizations, the judges found.

Because organizations that serve an illegal purpose already can’t have tax-exempt status, no such organization may participate in this loan forgiveness program. Both judges held that the Education Department exceeded its authority by granting itself the power to determine which nonprofits’ employees can’t be eligible.

In short, judges Joun and Ali said the Trump administration can’t change federal Public Service Loan Forgiveness program rules to punish people who work for certain kinds of nonprofits that the administration doesn’t like – or to use the program to advance its agenda.

What this means for borrowers and nonprofits

These rulings are good news for borrowers who work for nonprofits whose missions are at odds with the Trump administration’s agenda.

Both rulings vacated the new regulation, which means the federal government cannot implement its revised rule anywhere in the country.

The U.S. Supreme Court held in 2025 that district court judges couldn’t impose nationwide injunctions. But that ruling does not affect court rulings that strike down agency regulations.

If the administration appeals, an appellate court could restore the new regulation.

The Supreme Court could even get involved at some point. But although the court has been expanding executive power in some situations, the justices have reduced the leeway administrative agencies have to issue regulations that add additional requirements to clear statutes.

In my view, the Supreme Court would therefore be unlikely to side with the administration if it were to hear this case.

Implications for everyone else

Both judges held that the revised rule exceeded the Education Department’s authority. Joun in Massachusetts went further than Ali in Washington.

Joun held that the new regulation “is facially unconstitutional because it discriminates on the basis of viewpoint.”

That’s important because he recognized that “selectively targeting” organizations because their goals are contrary to those of the administration is very different from trying to prevent the employees of criminal organizations from having their student loans forgiven.

The Trump administration has been aggressively jumbling these two things together. Because organizations’ viewpoints are protected by the U.S. Constitution, the government can’t discriminate in the Public Service Loan Forgiveness program against an organization that advocates for undocumented immigrants to stay in the country, for example – or one that seeks to have them removed.

On the other hand, violent or illegal tactics are not protected by the Constitution or eligible for tax-exempt status. That means an organization that employs them can be denied benefits.

The Public Service Loan Forgiveness program regulation that the Trump administration has sought to implement expressly blurs these lines. I think it’s reasonable to interpret this jumbling as a tactic intended to chill protected activity by instilling fear in those who disagree with the Trump administration’s policies. And I see Joun’s opinion as a bulwark against that type of intimidation.

These rulings should give Americans of all political stripes more confidence that their rights will be respected, no matter who is in office.

Benjamin Leff is a member of the board of directors of Better Future Forward, a nonprofit organization that seeks to provide outcomes-based loans for higher education.