Two judges block Trump student loan rules before July 1 effective date

Two federal judges block rules before July 1

Two federal court rulings struck down separate Trump administration student loan policies as they were set to take effect on July 1, 2026. Judge Myong Joun in Boston blocked a rule that would have excluded public service workers from the Public Service Loan Forgiveness (PSLF) program if their employers had a "substantial illegal purpose." Days earlier, Judge Beryl A. Howell in Washington, D.C. had temporarily blocked the Education Department from applying narrow caps on graduate student borrowing to certain fields.

The program has misdirected tax dollars into activist organizations that not only fail to serve the public interest, but actually harm our national security and American values.

The combined rulings represented two legal defeats for the administration's effort to overhaul the federal student loan system, with millions of borrowers affected by the July 1 policy changes.

Public Service Loan Forgiveness rule struck down

Judge Joun ruled that the Education Department's final rule from October 2025, which defined "substantial illegal purpose" to include activities such as aiding illegal immigration, supporting terrorism, or providing gender-affirming care to minors, was unlawful. The judge found it arbitrary and capricious and a violation of the First Amendment. The rule would have allowed the department to disqualify employers of borrowers in the PSLF program, which forgives federal loans after 10 years of public service and has provided relief to more than 1 million borrowers since 2007.

The rule is unlawful, arbitrary and capricious, and violates the First Amendment.

Democratic-led states, cities, and nonprofit groups had sued in November 2025, arguing the statute did not grant the department authority to create such exceptions and that the policy lacked a rational basis. The ruling prevented the rule from taking effect on July 1.

Graduate loan caps temporarily lifted for some

A separate ruling by Judge Howell temporarily paused part of the administration's definition of "professional programs," which had restricted annual federal borrowing to $20,500 for non-professional graduate degrees, compared to $50,000 for designated professional degrees like law and medicine. The judge described the department's interpretation as puzzling and said students would suffer irreparable harm without a stay. In response, the Education Department on June 29 revised the list of eligible programs, moving nursing, physical therapy, and anesthesiology into the professional category. The department said it would continue to defend the criteria, leaving future access to higher loan limits uncertain.

The department's actions are puzzling and the plaintiffs would suffer irreparable harm.

The caps are part of the tax and spending law passed earlier in the Trump administration; aggregate limits were set at $200,000 for professional and $100,000 for non-professional programs.

Broader changes and the July 1 effective date

Beyond the blocked rules, July 1 marked the start of several other loan system changes. New graduate students face the statutory borrowing caps, and parents of undergraduates can borrow up to $65,000 total per student. The Education Department introduced two new repayment plans, a tiered standard plan with terms up to 25 years and the Repayment Assistance Plan tied to adjusted gross income, while phasing out older options. More than 7 million borrowers in the defunct SAVE repayment plan will be notified they must switch within 90 days or be automatically moved to a less flexible option. The department also began offering a 1 percentage point interest rate discount for those who set up automatic bank payments, good for two years.