The Department of Education proposes tightening PSLF eligibility to ensure that borrowers who work for organizations with a “substantial illegal purpose” can no longer receive loan forgiveness, even if they themselves are compliant.
Public comments are due on or before September 17, 2025. To view this Federal Register publication, click here.
Key Components of the Proposed Rule
- Redefinition of ‘Qualifying Employers’: Employers engaging in activities such as aiding illegal immigration, terrorism, child trafficking, or providing gender‑affirming care to minors could be deemed non‑qualifying.
- Borrower Impacts: Employees of disqualified organizations would lose credit toward loan forgiveness for periods worked post-determination. However, advanced notice and recertification paths are included.
- Employer Reinstatement: Disqualified employers might regain PSLF eligibility either after a 10-year ban or by submitting and complying with an approved corrective action plan. The Department must update its qualifying-employer list within 30 days of reinstatement.
Rulemaking Process & Timeline:
- Executive Order: The reforms stem from President Trump’s March 7 , 2025 “Restoring Public Service Loan Forgiveness” executive order.
- Negotiated Rulemaking: A committee convened from June 30 to July 2, 2025, and made 15 substantive changes, but did not reach full consensus.
- Public Comments Open: A formal Notice of Proposed Rulemaking (NPRM) was officially published in the Federal Register on August 18, 2025, formally opening the rulemaking process for public participants. The deadline for submitting comments is September 17, 2025.
- Anticipated Effective Date: If finalized, the new rule provisions are designed to take effect on July 1, 2026, meaning any months worked for disqualified employers after that date would no longer count toward PSLF.
Reactions & Concerns
- Advocacy groups and unions argue the policy could unfairly punish public service workers, especially those in nonprofit, healthcare, and education sectors, for the actions of their employers. They view it as politically motivated and potentially unconstitutional.
- Legal Risks: Observers expect challenges over First Amendment and administrative overreach, given the broad and subjective nature of disqualifying criteria.
- Department’s Justification: ED asserts the rules align PSLF with its statutory intent and protect taxpayer dollars from subsidies to organizations violating laws or public policy.
“President Trump has given the Department a historic mandate to restore the Public Service Loan Forgiveness program to its original purpose—supporting public servants who strengthen their communities and serve the public good, not benefiting businesses engaged in illegal activity that harm Americans,” said Under Secretary of Education Nicholas Kent. “The federal government has a vital interest in deterring unlawful conduct, and we’re moving quickly to ensure employers don’t benefit while breaking the law.”