WASHINGTON — More than 20 Democrat-led states are challenging a new Trump administration policy designed to block nonprofit and government workers from a student loan cancellation program if federal officials determine their employer has a “substantial illegal purpose.”

The policy is aimed primarily at organizations that work with immigrants and transgender youth.

In the lawsuit filed Monday in Massachusetts, the states argue the Trump administration overstepped its authority when it added new eligibility rules for the Public Service Loan Forgiveness program. The overhaul will worsen job shortages and create instability in state workforces, the suit said.

The legal challenge is being led by New York, Massachusetts, California and Colorado. New York Attorney General Letitia James said th

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