Illinois and Chicago sue over public service loan forgiveness rule
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Illinois and Chicago each joined separate lawsuits this week against the U.S. Department of Education over a new rule about the Public Service Loan Forgiveness Program (PSLF).
Why it matters: The program forgives the remaining balance on federal student loans after 10 years for eligible public service and nonprofit workers.
- For some, it's the only option to escape the burden of debt, and local governments and agencies say it helps them attract and retain talent for critical positions.
Driving the news: The Department of Education last week published a new rule that limits eligibility for PSLF as part of the broader crackdown on what the Trump administration calls "anti-American activists."
- Some of the "illegal activities" outlined in the rule include "engaging in the chemical and surgical castration or mutilation of children in violation of Federal or state law" and "aiding and abetting violations of Federal immigration laws."
Friction point: Illinois Attorney General Kwame Raoul and other attorneys general outline in a complaint filed Monday that the "illegal activities" are just groups and activities that the Trump administration opposes, such as support for immigrants, gender-affirming care and DEI initiatives.
- Chicago joined other cities, labor unions and the National Council of Nonprofits in a lawsuit the same day, saying "this Administration's history of targeting nonprofit organizations and government entities that disagree with its policy" will negatively affect the plaintiffs.
The other side: "It is unconscionable that the plaintiffs are standing up for criminal activity," Undersecretary of Education Nicholas Kent told Axios. "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."
What they're saying: "The public service loan forgiveness program totally changed my life," Chicago writer and podcaster Greta Johnsen tells Axios. "After 10 years of working in public radio, I was forgiven around $50,000 of debt. For the first time in my adult life, I was completely debt free. It's the only way I ever could have afforded going to journalism school in the first place."
Zoom in: Government employers eligible for PSLF include AmeriCorps, the Office of Immigrant and Employee Rights and Voice of America, among many others.
- The IRS has a database that shows whether a nonprofit has tax-exempt status or provides a qualifying public service.
- "Under President Trump's leadership, we're not aware of any federal agency engaged in terrorism or performing illegal medical procedures on children. The rule couldn't be simpler: if you're not breaking the law, you've got nothing to worry about," a department spokesperson said when Axios asked if all current eligible government agencies will remain so after the new rule is implemented.
Flashback: Former President George W. Bush signed PSLF into law in 2007 and has forgiven more than $78 billion since it started, according to the National Education Association.
What's next: The rule is scheduled to go into effect July 1, 2026.