The Department of Education has finalized an important regulatory update to the William D. Ford Federal Direct Loan Program, and it will have direct implications for professionals who counsel borrowers pursuing Public Service Loan Forgiveness. The final rule was published on February 10, 2026 and takes effect July 1, 2026.
At the center of the update is a renewed focus on employer eligibility under PSLF. While the program has always required borrowers to work for qualifying public service organizations, this rule adds clearer boundaries around what qualifies and what does not. The Department states that the goal is to ensure strong program integrity and responsible stewardship of federal funds.
What Has Changed
The new regulation revises the definition of a qualifying employer under 34 CFR 685.219. Specifically, it excludes organizations that engage in illegal activities and are determined to have a substantial illegal purpose.
In practical terms, this means:
- Employers found to meet the new exclusion criteria will no longer qualify for PSLF.
- Employment after the date of an ineligibility determination will not count toward the required 120 qualifying payments.
- Borrowers will retain credit for qualifying work completed before an employer is deemed ineligible.
- Employers may have a pathway to regain eligibility if corrective actions are taken and requirements are met.
For financial aid professionals, the preservation of previously earned credit is a particularly important clarification. Borrowers who relied in good faith on an employer’s qualifying status will not lose progress they have already made.
Why This Matters for Aid Offices
Most institutions will not see immediate operational disruption. However, the regulatory shift signals a stronger emphasis on institutional accountability within the PSLF framework.
Aid administrators should be prepared to:
- Review counseling materials related to PSLF employer eligibility.
- Encourage borrowers to submit employment certification regularly.
- Monitor updates from Federal Student Aid regarding employer determinations.
- Support borrowers who may have questions about how employer status could affect their forgiveness timeline.
As with prior PSLF changes, clear communication will be critical. Borrowers often focus on repayment plans and payment counts, but employer eligibility can be just as consequential.
The Bigger Picture
PSLF has undergone significant regulatory evolution in recent years. This latest rule reflects the Department’s effort to clarify standards and reinforce confidence in the program’s administration. For financial aid professionals, it is another reminder that effective counseling requires not only understanding borrower repayment options, but also staying current on policy changes that shape long term forgiveness outcomes.
As the July 1, 2026 effective date approaches, now is a good time to brief your team and incorporate these updates into training and outreach materials. Staying proactive will help ensure borrowers continue making informed decisions about their public service careers and their federal student loans.
SOURCE:
Federal Register: William D. Ford Federal Direct Loan (Direct Loan) Program