The U.S. Department of Education has proposed a new rule that aims to limit eligibility for the Public Service Loan Forgiveness (PSLF) program, focusing on employees of organizations involved in illegal activities. This Notice of Proposed Rulemaking (NPRM) seeks to prevent taxpayer-funded benefits from going to borrowers employed by entities engaged in unlawful conduct, such as supporting terrorism or discrimination.
This proposal is part of a broader initiative to reinforce the PSLF program’s original intent, which is to support genuine public service roles. The new rule would disqualify organizations found to have a “substantial illegal purpose,” thereby narrowing the scope of eligible employers under the PSLF program.
Nicholas Kent, Under Secretary of Education, stated, “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.” He emphasized the federal government’s interest in deterring unlawful conduct, indicating a swift move to ensure that employers engaged in illegal activities do not benefit from federal programs.
Context and Background of Proposed Changes
The proposed adjustments follow President Trump’s Executive Order on March 7, 2025, which directed the Department to revise PSLF regulations. This executive order specifically aimed to redefine what constitutes “public service” by excluding organizations involved in substantial illegal activities.
In May 2025, the Department engaged with the public through two hearings to gather feedback from borrowers and stakeholders in higher education. Following these public consultations, a negotiated rulemaking committee was formed in July to examine and refine the draft regulations. While most committee members supported the redefinition of qualifying PSLF employers, there was dissent, as one member objected to the proposed changes.
Public Feedback and Next Steps
The Department is currently inviting public comments on the NPRM via the Federal eRulemaking Portal. All feedback must be submitted by September 17, 2025, as late submissions or those sent by email or fax will not be considered. After the comment period closes, the Department will review all input before finalizing the regulations.
If adopted, this rule would significantly narrow the types of employers eligible for PSLF, aligning the program more closely with organizations that demonstrate a commitment to public service. This shift aims to prevent organizations involved in illegal activities from obtaining benefits from a program designed to support public service.
The PSLF program, established under Title IV of the Higher Education Act, forgives the remaining balance on federal student loans for borrowers who work in qualifying public service jobs and make 120 monthly payments under eligible repayment plans. The proposed changes signify a move toward stronger oversight, ensuring the integrity of the PSLF program is maintained.
By focusing on eligible organizations that truly serve the public interest, the Department aims to uphold American values and ensure that the PSLF program continues to benefit those working to enhance their communities.
