Trump Administration Tightens Public Service Loan Forgiveness Rules

Student-loan borrowers may soon face significant changes to the Public Service Loan Forgiveness (PSLF) program, as the Trump administration has finalized a new rule that limits eligibility. This regulation will take effect on July 1, 2026, and aims to exclude certain employers from qualifying for the program based on their activities.

On October 30, the U.S. Department of Education announced that the final rule would narrow the definition of a “qualifying employer” for PSLF, previously accessible to any government or nonprofit entity. The new criteria will disqualify organizations engaged in activities deemed illegal by the administration, including actions related to undocumented immigrants and certain medical procedures.

The rule is part of an executive order President Donald Trump signed in March, which redefines “public service” and aligns it with the administration’s political perspectives. According to Undersecretary of Education Nicholas Kent, the program should not support entities that violate the law. He stated, “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.”

In response to the announcement, advocacy groups such as Democracy Forward and Protect Borrowers expressed their intention to challenge the rule in court. They described the changes as a “direct and unlawful attack” on essential workers, including nurses, teachers, and first responders.

Key Changes to Eligibility

The revised rule alters what constitutes a qualifying employer, now excluding those with a “substantial illegal purpose.” This includes supporting terrorism, aiding undocumented immigrants, and engaging in a pattern of illegal conduct. The Department of Education explained that when an organization consistently engages in illegal activities, it undermines the public good, warranting exclusion from PSLF eligibility.

The department emphasized that employers complying with the law or facing only minor compliance issues will remain unaffected. As per the new guidelines, the Secretary of Education will assess evidence of illegal activity to determine whether an employer is disqualified. Employers will have the opportunity to review the allegations and rebut the department’s findings.

Impact on Borrowers and Employers

If an employer is deemed ineligible for PSLF, they may reapply after ten years or enter a “corrective action plan” before disqualification to maintain eligibility. Importantly, borrowers cannot appeal their employer’s qualifying status. Once an employer loses its PSLF qualification, any payments made by borrowers after July 1, 2026 will not count towards PSLF progress. However, previous payments made before this date will still be considered.

The Department of Education plans to update the PSLF Help Tool, which assists borrowers in finding eligible employers, to reflect any pending eligibility determinations. This development marks a significant shift in how public service workers can access student loan forgiveness, stirring controversy and potential legal battles in the months to come.

For those affected, staying informed about these changes will be crucial as the implementation date approaches.