Trump Administration Limits Public Service Loan Forgiveness Eligibility

Changes to the Public Service Loan Forgiveness (PSLF) program will soon restrict eligibility for certain borrowers. On October 30, the Department of Education, under the Trump administration, finalized a rule that narrows the definition of qualifying employers for this debt relief program aimed at public service workers.

The new regulations will take effect on July 1, 2026, and will exclude employers determined to be engaging in illegal activities. This decision follows an executive order signed by Donald Trump in March, which sought to redefine “public service” to align with the administration’s political stance.

In a statement, Undersecretary of Education Nicholas Kent emphasized that the PSLF program was designed to support those dedicated to public service, stating, “not to subsidize organizations that violate the law, whether by harboring illegal immigrants or performing prohibited medical procedures.”

The decision has drawn significant backlash from advocacy groups. Organizations such as Democracy Forward and Protect Borrowers have announced plans to challenge the changes in court. They argue that these alterations constitute a direct attack on essential public service workers, including nurses, teachers, and first responders.

Key Changes Under the New Rule

Under the newly established rule, the definition of a “qualifying employer” has shifted. Previously, any government or nonprofit entity was eligible. Now, employers found to have a “substantial illegal purpose” will be disqualified. This includes entities involved in activities such as supporting terrorism, assisting transgender individuals in transitioning, or working with undocumented immigrants.

The Department of Education’s fact sheet clarified, “When an organization has a pattern or practice of engaging in certain illegal conduct, they have a substantial illegal purpose because a significant amount of their activities are supporting illegal activity.” However, employers that comply with laws and only have minor compliance issues will remain unaffected by these changes.

Determining Employer Eligibility

To assess whether an employer is engaging in illegal activity, the Secretary of Education will evaluate evidence presented. Employers deemed potentially ineligible will receive notification and have the opportunity to address allegations. Additionally, borrowers will be informed if their employer is facing disqualification.

If an employer is ultimately ruled ineligible for PSLF, they may reapply after a period of ten years or enter a “corrective action plan” to regain eligibility before disqualification occurs. Importantly, any payments made by borrowers to disqualified employers after July 1, 2026, will not count toward PSLF progress. However, payments made prior to this date will still be recognized.

As concerns regarding these changes mount, advocacy groups are preparing for legal action, asserting that the new rule undermines the intent of the PSLF program and the livelihoods of countless public service professionals. The legal implications of this rule and its impact on borrowers will unfold in the coming months as stakeholders navigate the changing landscape of student loan forgiveness.