States and cities challenge Trump policy overhauling public service loan forgiveness

WASHINGTON (AP) — More than 20 Democrat-led states are challenging a new Trump administration policy designed to block nonprofit and government workers from a student loan cancellation program if federal officials determine their employer has a “substantial illegal purpose.”

The policy is aimed primarily at organizations that work with immigrants and transgender youth.

In the lawsuit filed Monday in Massachusetts, the states argue the Trump administration overstepped its authority when it added new eligibility rules for the Public Service Loan Forgiveness program. The overhaul will worsen job shortages and create instability in state workforces, the suit said.

The legal challenge is being led by New York, Massachusetts, California and Colorado. New York Attorney General Letitia James said the rule is “a political loyalty test disguised as a regulation,” adding that it’s “unjust and unlawful to cut off loan forgiveness for hardworking Americans based on ideology.”

A separate coalition of cities, nonprofits and labor organizations also filed a legal challenge in Massachusetts on Monday. That suit was brought by Boston; Chicago; Albuquerque, New Mexico; San Francisco; Santa Clara, California; and the National Council of Nonprofits.

Responding to the lawsuits, Under Secretary of Education Nicholas Kent said it’s unconscionable that the plaintiffs are standing up for criminal activity.

“This is a commonsense reform that will stop taxpayer dollars from subsidizing organizations involved in terrorism, child trafficking, and transgender procedures that are doing irreversible harm to children,” Kent said in a statement. “The final rule is crystal clear: the Department will enforce it neutrally, without consideration of the employer’s mission, ideology, or the population they serve.”

Another lawsuit challenging the rule is expected to be filed Tuesday on behalf of the Robert F. Kennedy Human Rights advocacy organization, the American Immigration Council and The Door, a legal group. They’re being represented by the groups Student Defense and Public Citizen.

Congress created the program in 2007 to steer more graduates into lower-paying public sector jobs. It promises to forgive their federal student loans after they make payments for 10 years while working in government jobs or for many nonprofits. More than 1 million Americans have had their loans canceled through the program, including teachers, firefighters, nurses and public defenders.

Under the new policy finalized last week, employers can be removed if they engage in activities including the trafficking or “chemical castration” of children, illegal immigration and supporting terrorist groups. “Chemical castration” is defined as using hormone therapy or drugs that delay puberty — gender-affirming care common for transgender children or teens.

The education secretary gets the final say in determining whether a group’s work has an illegal purpose, weighing whether the “preponderance of the evidence” leans against them.

In their lawsuit, the states argue that entire state governments, hospitals, schools and nonprofits could unilaterally be ruled ineligible by the secretary. They say Congress granted the benefit to all government workers, with no room for the Education Department to add limits.

The states also object to the department’s reliance on the phrase “substantial illegal purpose,” saying it’s an “overbroad and impermissibly vague term” that is aimed “at chilling activities that are disfavored by this Administration.”

The lawsuit asks a federal judge to declare the policy unlawful and forbid the Education Department from enforcing it.

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