Major Changes Coming to Public Service Loan Forgiveness Program

Significant changes are coming to the Public Service Loan Forgiveness (PSLF) program. The Department of Education has finalized a rule that narrows eligibility for the program, set to take effect in July 2026. The modification changes the definition of a "qualifying employer" to exclude organizations that participate in what the department deems "substantial illegal activity."

Approximately 7 million borrowers are currently enrolled in the program. While the Department of Education states the intent is to ensure benefits go to legitimate public servants, advocates have filed lawsuits challenging the changes. They argue the new rules could disqualify public servants based on political views rather than the nature of their public service work.

The Public Service Loan Forgiveness program was approved by Congress in 2007. It is designed to forgive student debt for government and nonprofit workers after 10 years of making qualifying payments. The program allows borrowers who dedicate at least a decade of their careers to public service to have their loan balances eventually wiped out.

The Trump administration is changing this popular program. At the end of October, the Department of Education finalized its rule to narrow eligibility. This action responds to President Donald Trump's March executive order, which directed the education secretary to redefine what constitutes "public service."

The key change in the PSLF rule concerns employer eligibility. Previously, any public service employer qualified for the program. Under the new rule, the definition of a "qualifying employer" will change to exclude employers that have participated in "substantial illegal activity."

The Department of Education provided examples of what constitutes substantial illegal activity, including:

• Actions supporting terrorism
• Actions supporting gender-affirming care

If the department determines an employer has engaged in illegal activity, the employer will be notified and given an opportunity to rebut the findings. However, borrowers themselves cannot appeal these findings. If an employer is disqualified, they can reapply for qualifying status within 10 years or enter a "corrective action plan" with the department. Once an employer is deemed ineligible, payments made by borrowers while working for that employer will not count toward PSLF, though retroactive payments made prior to the determination remain valid.

Reactions to the finalized rule have been mixed. The Department of Education stated the changes are intended to ensure that PSLF recipients have employers that contribute to public service and do not violate laws. Under Secretary of Education Nicholas Kent said the administration is "refocusing the PSLF program to ensure federal benefits go to our Nation's teachers, first responders, and civil servants who tirelessly serve their communities."

Conversely, borrowers and advocates have expressed concern that the changes will block relief for public servants because their employers do not align with the administration's political views. Shortly after the rule was released, a coalition of advocates and nonprofits sued the administration, accusing it of violating the law and harming government and nonprofit recruitment. Some Democratic lawmakers have also called for the rule to be rescinded.

One borrower, nonprofit worker Megan Flocken, expressed relief that the program might remain intact despite the changes, stating, "I'm counting my lucky stars that there's still the possibility that this PSLF program will remain intact because I have dedicated my whole professional life to public service."

Senator Bernie Sanders also voiced opposition, writing on X that the administration does "not have the right to take away student debt forgiveness from teachers, nurses, veterans and other public servants if they do not show loyalty to your right-wing political agenda."

Despite the finalized rule, student-loan servicers have indicated that borrowers should not expect immediate changes. Aidvantage, a servicer for PSLF loans, posted on its website that "For now, there are no impacts to borrowers, payment counts, or discharges." Servicers have stated that borrowers will receive updates as the regulations go into effect. The final rule is set to go into effect in July 2026.