The Education Department has dropped two of its three appeals over a rule that would have let it strip Public Service Loan Forgiveness eligibility from employers it accused of illegal activity. On October 21, 2026, Justice Department lawyers filed joint stipulations to dismiss the appeals in the D.C. Circuit and in a First Circuit case brought by nonprofits.

The PSLF employer rule remains vacated under two June 30 court rulings.

The government appealed all three rulings in August, and its appeal in a companion case brought by 22 states and D.C. is still on the First Circuit’s docket. No dismissal had been filed in that case as of October 21, and the government’s first brief there is due November 4. Because the government dropped the other two appeals on the same day, it appears likely the states’ appeal will be dropped as well.

The stipulations give no reason for the reversal, and each side agreed to pay its own fees and costs. For borrowers working toward Public Service Loan Forgiveness, the chance of the rule coming back now rests on a single remaining appeal, and is slim.

Which PSLF Appeals Did The Government Drop?

The government dropped its appeals in two of the three cases challenging the substantially illegal conduct PSLF rule. Here’s where each case in the legal fight over PSLF eligibility stands:

Student Defense, which represents the plaintiffs in the D.C. case with Public Citizen, posted the joint stipulation in that case (PDF File). Chief Counsel Dan Zibel called the outcome a win for public servants counting on student loan forgiveness.

What Would The PSLF Employer Rule Have Done?

The rule would have let the Education Department disqualify employers it found had a “substantial illegal purpose.” The Department listed activities such as aiding violations of federal immigration law and illegal discrimination. Borrowers at a disqualified employer would have stopped earning qualifying PSLF payments after the determination date.

The Department published the final rule on October 31, 2025, and lawsuits followed within days. The rule grew out of a 2025 executive order on PSLF that targeted the same categories of employers.

However, a day before the rule was set to take effect, judges in each of the three cases all struck down the rule. About a month later, the Department of Education filed their intent to appeal the rulings, which they have since dropped.

Where Does The Massachusetts Case Stand?

The Massachusetts ruling still vacates the rule nationwide, and the states’ appeal is now the government’s only path to reviving it. Judge Myong J. Joun ruled on June 30 that the rule was contrary to law, arbitrary and capricious, and a First Amendment violation.

If the government drops the states’ appeal, Judge Joun’s ruling becomes final and nothing changes with the current PSLF employer rules.

What Does The Dismissal Mean For PSLF Borrowers?

Nothing changes in how PSLF works day to day, and the employer rule can’t be enforced while it remains vacated. The existing rules for qualifying PSLF employers stay in place. Government agencies and 501(c)(3) nonprofits continue to qualify, along with the other employer types the program already covered.

For workers at immigration legal aid groups, health systems, and advocacy nonprofits, this rule could have jeopardized their eligibility to receive loan forgiveness. Those borrowers were at the center of the debate over who could lose PSLF access, and some were weighing job changes to protect their progress.

What Should PSLF Borrowers Do Now?

1. Keep certifying employment. Submit your PSLF form at least once a year and after any job change, as laid out in our PSLF checklist.
2. Stay put if your job was the worry. Your employer can’t be disqualified under the vacated rule, so review how PSLF qualification works before making a career move.
3. Stay on a qualifying plan. The Repayment Assistance Plan counts toward PSLF for new and existing borrowers, along with IBR, PAYE, and ICR.

FAQs

Is The PSLF Employer Rule In Effect?

No. Courts vacated the PSLF employer rule on June 30, 2026, and the government dropped two of its three appeals on October 21. The rule stays vacated unless the First Circuit reverses the states’ case.

What Happens Next In The Massachusetts Case?

The government’s opening brief in the states’ appeal is due November 4, 2026. If the government files a dismissal instead, the June 30 rulings become final. We’ll update our PSLF lawsuit coverage when the docket changes.