Democratic-led states sue to block PSLF rule on substantial illegal purpose

More than 20 Democratic-led states on Monday sued the U.S. Education Department in Massachusetts to block a new rule that could bar employees of certain nonprofits and government entities from receiving Public Service Loan Forgiveness if federal officials determine their employer has a "substantial illegal purpose." The suits, led by New York, Massachusetts, California and Colorado, say the department exceeded its authority and that the policy will harm state workforces and public-service recruitment.

The final rule, issued last week, allows the Education Department to remove employers from the loan-forgiveness program if they are found to engage in activities the department lists as illegal, including human trafficking, supporting terrorist groups, facilitating illegal immigration, or what the rule calls "chemical castration" of children. The department defines that term to include hormone therapy or drugs that delay puberty, a form of gender-affirming care used by some transgender youths. The education secretary would make the ultimate determination whether a group's work has a substantial illegal purpose using a preponderance-of-the-evidence standard.