Colorado has joined 21 states in suing the U.S. Department of Education over changes to a student loan forgiveness program that gave government and nonprofit employees student loan relief after 10 years.
The Public Service Loan Forgiveness program has promised since 2007: Work 10 years in public service — as a teacher, nurse, police officer, or domestic violence prevention worker for example — and your loans are erased. The program was established with bipartisan support by Congress and signed into law by then-President George W. Bush. The program forgives borrowers’ remaining federal student loan debt after 10 years of qualifying public service and consistent payments.
From October 2021 to May 2024, 17,650 borrowers in Colorado had more than $1.2 billion in student loan debt discharged through the public service program, according to Education Department data.
But a new federal rule lets the Secretary of Education unilaterally deny forgiveness if an employer engages in “substantial illegal purpose.” The administration gave a limited definition of “illegality,” such as activities that support undocumented immigrants, provide gender-affirming health care to transgender youth, engage in political protest, and promote diversity, equity, and inclusion efforts. For example, local first-responders could be denied loan forgiveness if their city has diversity, equity and inclusion policies, plaintiffs argue.
The rule is set to take effect in July 2026.
California, Massachusetts, New York and Colorado are co-leading the lawsuit. Attorneys general from those states argue the sweeping new rule could be used to punish states and organizations for activities like providing gender-affirming care or promoting diversity efforts.
Attorney General Phil Weiser argues the move is illegal and an affront to the legal promise made to public servants.
“To undermine this promise is appalling,” he said. “It’s bullying. It’s a political game. We’re not going to stand for it.”
In announcing the new rule Oct. 30, the U.S. Department of Education said the eligibility requirements for what constitutes a qualifying public service employer, “have not been adequately monitored, allowing certain organizations to qualify despite engaging in illegal activities that harm their communities and the public good. The Trump Administration is rightsizing the program to ensure that PSLF benefits go only to borrowers employed by organizations that genuinely serve the public.”
It said activities considered illegal include terrorism, trafficking, aiding and abetting illegal discrimination, and certain violations of state law.
But the coalition warns that the language of the new authority is vague and could mean that thousands of public workers could suddenly lose loan forgiveness eligibility through no fault of their own. They also worry it will cause fewer people to enter public service, leading to more staffing shortages, higher turnover and skyrocketing costs to maintain essential services.
The lawsuit asserts that the federal law doesn’t give the Department of Education discretion to carve out exceptions based on ideology and further argues that it gives the department unfettered power to target specific state policies or social programs while exempting federal agencies from scrutiny.
Weiser called the rule “an executive power grab, undermining the role of Congress.” He said it’s also an affront to federalism.
“We have employees who are protected by this loan forgiveness program. But what is this administration saying? That they can actually override states and their democratically elected decisions because the Education Department decides something might be illegal. That's not the way our system works.”
The states want the court to block the rule.
A group of private plaintiffs and cities, including Boston, Chicago, San Francisco and Albuquerque, also sued Monday to block the implementation of the new rule.
| This story is part of a collection tracking the impacts of President Donald Trump’s second administration on the lives of everyday Coloradans. Since taking office, Trump has overhauled nearly every aspect of the federal government; journalists from CPR News, KRCC and Denverite are staying on top of what that means for you. Read more here. |
