San Francisco and Santa Clara County have joined a national coalition of cities, labor unions, and nonprofit groups in suing the U.S. Department of Education, accusing President Donald Trump’s administration of illegally altering a federal student loan forgiveness program to target public service employers it politically opposes.

The lawsuit, filed in federal court, challenges a new rule that would allow the U.S. Department of Education to disqualify government and nonprofit employers from the Public Service Loan Forgiveness, or PSLF program, if they do not align with the administration’s policies.

The PSLF program forgives remaining federal student loan balances for eligible workers after 120 qualifying monthly payments while employed full-time by a government agency or a nonprofit organization.

San Francisco City Attorney David Chiu said in a statement Monday that the change “breaks a bipartisan promise” Congress made to public servants when it created the PSLF program in 2007.

“The Federal Administration cannot step into the role of Congress, break that commitment, and punish workers counting on this debt relief simply because it disagrees with the lawful policies of certain employers,” Chiu said.

Santa Clara County Counsel Tony LoPresti called the rule “deeply dangerous and patently illegal,” saying it would politicize eligibility for loan forgiveness and undermine the ability of local governments to hire and retain essential workers.

“This administration has been hell-bent on punishing dedicated public servants, from their massive unlawful reductions to the federal workforce to their latest attempt to dismantle public service loan forgiveness for thousands of nurses, teachers, first responders, and other government workers,” LoPresti said. “The County of Santa Clara employs more than 24,000 dedicated public servants, and we will continue to defend their rights, and the rights of all government employees, in court.”

Bay Area communities lend their voice

The lawsuit argues the new rule violates the Administrative Procedure Act and the Higher Education Act, which explicitly guarantee PSLF eligibility for government and 501(c)(3) nonprofit employees.

San Francisco and Santa Clara County joined Boston, Chicago, Albuquerque, and a range of national organizations, including the American Federation of Teachers, National Education Association, and National Council of Nonprofits, as plaintiffs. The coalition is represented by Protect Borrowers and Democracy Forward.

San Francisco officials said the city relies on the PSLF program to help recruit and retain its 34,000 employees, many of whom struggle with high living costs in the Bay Area. The city’s Office of Financial Empowerment held workshops last year that helped more than 2,100 public service employees register for the program.

The U.S. Department of Education announced on Oct. 30 its final rule aimed at restoring the program to what it described as its “intended purpose” of supporting Americans who work in public service.

“The County of Santa Clara employs more than 24,000 dedicated public servants, and we will continue to defend their rights, and the rights of all government employees, in court.”
Tony LoPresti, Santa Clara County Counsel

The new rule changes the definition of a “qualifying employer” to exclude organizations that, according to the Department of Education, engage in unlawful activities or have a substantial illegal purpose, including those accused of supporting terrorism or aiding and abetting illegal immigration.

The federal department alleges the program’s eligibility standards have not been sufficiently monitored, allowing certain organizations to qualify despite allegedly engaging in illegal activity.

“Taxpayer funds should never directly or indirectly subsidize illegal activity. The Public Service Loan Forgiveness program was meant to support Americans who dedicate their careers to public service — not to subsidize organizations that violate the law, whether by harboring illegal immigrants or performing prohibited medical procedures that attempt to transition children away from their biological sex,” Undersecretary of Education Nicholas Kent said in a statement. “With this new rule, the Trump Administration is refocusing the PSLF program to ensure federal benefits go to our Nation’s teachers, first responders, and civil servants who tirelessly serve their communities.”