The PSLF Employer Rule Was Struck Down. Here’s What It Means for You — and Your Employer

By The Finnita Team

For months, public-service workers across the country kept checking the same question: would a new federal rule let the government strip their employer of eligibility for Public Service Loan Forgiveness? On June 30, 2026, one day before that rule was set to take effect, a federal court struck it down.

U.S. District Judge Myong J. Joun vacated the Department of Education’s “substantial illegal purpose” employer rule in full, and a second federal court reached the same conclusion two days later. The rule never took effect. The long-standing definition of a qualifying PSLF employer still stands, unchanged: government agencies, 501(c)(3) nonprofits, and other qualifying public-service organizations. If you worked for a qualifying employer on June 29, you work for a qualifying employer today.

Much of the spring coverage focused on the lawsuits and the July 1 deadline. The ruling that ended the fight arrived the day before that deadline and drew far less attention. Here is what the court actually did, what is true now, and what to watch next.

What did the court actually rule?

On June 30, 2026, Judge Myong J. Joun of the U.S. District Court for the District of Massachusetts issued a 68-page decision vacating the Department of Education’s PSLF employer-eligibility rule in its entirety. The court held the rule contrary to law, beyond the Department’s statutory authority under the Higher Education Act, arbitrary and capricious, and a violation of the First Amendment. The rule, the court found, “effectively restricts the expression of others by threatening to revoke PSLF eligibility” (opinion of Judge Joun, June 30, 2026).

The decision resolved two consolidated challenges: one brought by the National Council of Nonprofits and a coalition of organizations, and one brought by Massachusetts and 21 other states plus the District of Columbia. Two days later, on July 2, 2026, Judge Amir H. Ali of the U.S. District Court for the District of Columbia ruled the same way in a separate case, finding that the rule exceeded the Secretary of Education’s authority under the Higher Education Act. Two federal courts, on independent grounds, struck the same rule down. The National Association of Student Financial Aid Administrators reported the vacatur the next day, noting it landed “hours before” the effective date (NASFAA, July 1, 2026).

Because the court vacated the rule rather than pausing it, the rule has no legal force anywhere in the country. Our detailed explainer on the July 2026 PSLF employer rule walks through the regulation’s mechanics and the litigation that ended it.

Is my employer still eligible for PSLF?

Yes, if it was eligible before. Nothing about who qualifies for PSLF changed. The rule that would have added a new test — letting the Secretary of Education disqualify an employer found to have a “substantial illegal purpose” — never took force. The qualifying-employer definition that has governed PSLF since Congress created the program in 2007 is the definition in force today.

That definition turns on what kind of organization your employer is, not on a political appointee’s judgment about its activities. A qualifying employer is a federal, state, local, or tribal government organization; a 501(c)(3) nonprofit; or one of a narrow band of other nonprofits that provide qualifying public services. If your employer fit that definition before, it fits it now. The authoritative place to confirm your own employer is the federal PSLF Help Tool at studentaid.gov, which returns the Department of Education’s current classification. If you work at a nonprofit, our guide to PSLF eligibility for nonprofit employees covers the qualifying-employer definition in depth.

Here is the difference between what borrowers were bracing for and what is actually true:

What the struck-down rule would have done	What is true now
Let the Secretary disqualify an employer for a “substantial illegal purpose”	No such authority exists; the rule was vacated
Taken effect July 1, 2026	Never took effect
Added a perjury-level attestation to the PSLF form	The Department is removing that attestation
Applied going forward, to conduct after July 1	Moot; there is no rule to apply

What happened to the new attestation on the PSLF form?

The Department of Education is removing a new attestation it briefly added to the PSLF form. On June 19, 2026, it revised the PSLF employment certification form to require employers to certify “under penalty of perjury” that they had not engaged in any activity with a “substantial illegal purpose” on or after July 1, 2026. That attestation was tied directly to the rule the courts later struck down, and it caused real alarm while it was in place.

With the rule vacated, that attestation lost its basis. In a Federal Register notice dated July 13, 2026, the Department said it is “removing the attestation from the PSLF form” to comply with the court order, with no other change to the form. In practice, the certification form is returning to what it was before June. If you downloaded or submitted a form during those few weeks, it is worth a second look, though the fix is happening at the source.

Can the Department of Education still appeal?

It can. Both decisions came from federal trial courts, so the Department of Education has the option to appeal: the Massachusetts decision to the U.S. Court of Appeals for the First Circuit, and the D.C. decision to the D.C. Circuit. As of this article’s publication, no appeal had been filed, and the rule remains vacated nationwide.

An appeal, if one comes, would not by itself revive the rule. The rule is vacated now, and it would stay vacated unless an appeals court took the case and reversed. A brand-new rule would have to start the rulemaking process over and answer the legal problems two courts have already identified. Whether PSLF itself could ever go away is a separate question, and the short answer is that a program Congress created by statute cannot be erased by a regulation. We watch this kind of development continuously and will update this page if the status changes.

What should borrowers do now?

The best move has not changed, and it is the same move a specialist would have recommended before the rule was ever proposed: certify your employment, early and often.

The PSLF Employment Certification Form turns your work history into a certified record of qualifying payments, and certified credit is the strongest form your PSLF progress can take, because it is documented and locked in. File the form for your current employer, file it for any past qualifying employment you have not yet certified, and refile at every job change and once a year. That keeps your record current. None of it is because of the employer rule. Certifying is simply how PSLF is meant to work, and a clean certified record protects you against the ordinary problems, like a servicer transfer or a miscounted payment, that are far more common than any policy fight. If you want to understand the program’s requirements in full, our explainer on how PSLF actually works lays them out, and you can see whether your federal loans qualify in about 60 seconds at finnita.com.

What should employers tell their staff?

Tell them the rule that worried them was struck down before it took effect, and their PSLF eligibility is intact. Employees at a nonprofit, a hospital, a school district, or a government agency may have spent the spring worried their forgiveness was at risk, so a direct update is worth sending.

A few points help. Your organization’s qualifying status is unchanged. Employees should keep certifying their employment as they always have. And no one needs to change jobs, pause payments, or leave a qualifying employer because of this rule. For workers at government agencies and public-service organizations, our guide to student loan forgiveness for government and public-service workers covers how PSLF fits their careers. For an organization, PSLF remains one of the few benefits that costs the employer nothing while it can measurably improve an employee’s financial life.

Why this is exactly what a specialist watches

A year like 2026 is why a set-it-and-forget-it approach to federal loans fails so many people. In twelve months the ground shifted again and again: a new employer rule proposed and then vacated, the SAVE plan wound down, new repayment plans introduced, borrowing caps added. You can see the year’s other federal student loan changes in one place, and the through-line is that generalist tools and one-time advice cannot keep pace with policy that changes by the week.

Finnita is a student-loan enrollment service that does one thing: it enrolls borrowers into the federal repayment and forgiveness programs they qualify for, and keeps them enrolled correctly as the rules change. Finnita watches those changes so its customers don’t have to, and the employer rule is a working example of what that monitoring is for. Across all customers and all programs, Finnita holds a 98% enrollment success rate, and enrolled customers save an average of $468 per month. Finnita is a Delaware Public Benefit Corporation; it never refinances a federal loan into a private one; and if it fails to enroll a customer, that customer is refunded in full.

For borrowers, you can check your savings and see what you qualify for at finnita.com. For employers, Finnita provides this as a workforce benefit at no cost to the organization — get in touch to bring it to your team.

Frequently asked questions

Was the PSLF employer rule struck down?

Yes. On June 30, 2026, a federal judge in the District of Massachusetts vacated the Department of Education’s “substantial illegal purpose” employer rule in full, one day before it was set to take effect. A second federal court in Washington, D.C. reached the same result on July 2, 2026. The rule never took effect.

Is my employer still eligible for PSLF in 2026?

Almost certainly, if it was eligible before. The rule that would have changed employer eligibility was vacated, so the qualifying-employer definition in place since 2007 still governs. Government agencies, 501(c)(3) nonprofits, and qualifying public-service nonprofits remain qualifying employers. Confirm your specific employer in the federal PSLF Help Tool at studentaid.gov.

Did the PSLF employer rule take effect on July 1, 2026?

No. A federal court vacated it on June 30, 2026, the day before its scheduled effective date, and it has no legal force.

Do I need to do anything because of the ruling?

No action is required because of the rule itself. The best practice is unchanged: file the PSLF Employment Certification Form for current and past qualifying employment, and refile annually and at every job change, so your certified record stays current.

Can the government bring the rule back?

The Department of Education could appeal, and no appeal had been filed as of this article’s publication. An appeal would not automatically restore the rule, which stays vacated unless an appeals court reverses. Any new rule would have to restart the rulemaking process and address the legal problems the courts identified.

What was the “substantial illegal purpose” rule?

It was a Department of Education regulation, finalized October 30, 2025, that would have let the Secretary of Education disqualify an otherwise-qualifying employer from PSLF after finding it had a “substantial illegal purpose.” Two federal courts found the Department lacked the authority to write such a rule.

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