AYLESBURY, ENGLAND - SEPTEMBER 18: U.S. President Donald Trump talks at a press conference with UK Prime Minister Keir Starmer (not pictured) on September 18, 2025 in Aylesbury, England. The Trump administration is moving forward with a major overhaul of the PSLF program, which could limit student loan forgiveness for some borrowers. (Photo by Leon Neal/Getty Images)

Getty Images

The Department of Education cleared the next hurdle this week in its push to implement sweeping new rules that could limit student loan forgiveness under a critical program for public service workers.

The department closed a 30-day public comment period on Thursday for new regulations that would deny Public Service Loan Forgiveness to organizations that it determines engage in activities that have a “substantial illegal purpose.” The new rules are intended to codify President Trump’s March executive order directing the department to restrict student loan forgiveness under PSLF for organizations that engage in illegal or improper activities. But critics have argued that the proposed overhaul is unlawful without congressional approval, and would allow the department to punish organizations and borrowers for activities that simply don’t align with Trump administration priorities.

“This rule would add powers Congress never authorized and inject uncertainty into a program that millions rely on to plan their careers and finances,” said Jaylon Herbin, director of federal campaigns at the Center for Responsible Lending, in a statement on Thursday. “The proposal sets a dangerous precedent that the existing and future administrations could use to disqualify eligible employers for political or arbitrary reasons.”

The new PSLF rules restricting student loan forgiveness aren’t in effect yet. But the closure of the public comment period marks the next step in the rulemaking process. Here’s what borrowers should know.

How New Student Loan Forgiveness Restrictions For PSLF Would Work

PSLF allows borrowers to receive federal student loan forgiveness after making 120 qualifying payments (equivalent to 10 years) while working full-time for eligible nonprofit or public sector employers such as charitable organizations, public schools, or nonprofit hospitals. The program, created under George W. Bush in 2007, was intended to provide an incentive to borrowers to take traditionally lower-paying, high-need jobs in fields such as teaching, nursing, public health, and law enforcement. While the program got off to a rocky start, more than a million borrowers have now received student loan forgiveness through PSLF, making it one of the most significant federal debt relief programs.

The new regulations, if enacted, would allow the Department of Education to cut off entire organizations from qualifying for PSLF if they engage in activities that have a “substantial illegal purpose.” The proposed rules define these activities as facilitating the violation of federal immigration laws, facilitating the provision of certain medical services to transgender youth, violating state law, or engaging in what the rules characterize as illegal discrimination. While employers could appeal an adverse determination, individual student loan borrowers would have no recourse if their employer suddenly no longer qualifies for PSLF; they would have to find a new job with a different qualifying employer to continue pursuing student loan forgiveness.

The Department of Education has characterized the proposed regulatory changes to PSLF as necessary to protect taxpayers from subsidizing “illegal” activities.

“Instead of alleviating worker shortages in necessary occupations, the PSLF Program has misdirected tax dollars into activist organizations that not only fail to serve the public interest, but actually harm our national security and American values, sometimes through criminal means,” said President Trump in his executive order issued this spring.

“The regulatory changes outlined in this rule are designed to preserve the integrity of the PSLF program by ensuring that only borrowers employed by organizations engaged in lawful public service remain eligible for forgiveness,” said the department in commentary included with the publication of the proposed PSLF regulations in August. “By excluding employers that engage in activities with a substantial illegal purpose, the rule aims to better align PSLF eligibility with the program’s statutory intent—to reward public service.”

Diverse Coalition Slams Student Loan Forgiveness Restrictions In Public Comments

But critics of the proposed changes to PSLF argue that the regulations are illegal, as only Congress can change the rules governing student loan forgiveness and qualifying employment for the program. And groups are also arguing that the department could utilize the new rules to coerce or punish organizations, as well as state and city government’s, over policy disagreements.

More than 70 legal aid and consumer rights organizations signed onto a formal statement submitted during the now-closed public comment period, criticizing the proposed PSLF overhaul.

“The Department’s proposed rule would redefine qualifying employers by placing new conditions on qualification and attempt to grant the Secretary novel new authority to revoke 501(c)(3) and legal services employers’ qualifying status based on Secretarial findings that the employer engaged in certain types of activities disfavored by the President,” said the coalition in the statement. The proposed overhaul “would break dramatically from the statutory definition of public service jobs by providing the Secretary of Education with unprecedented new authority to determine that government, legal services, and 501(c)(3) nonprofit employers are no longer ‘public service’ employers if the Secretary deems that they have engaged in certain disfavored conduct. Under the Department’s proposal, the Secretary could revoke the public service employer designation based on the Secretary’s extra-judicial determination that the employer has engaged in activities with a 'substantial illegal purpose’ related to immigration, discrimination, transgender people, terrorism, or certain conduct associated with protest. Worryingly, in most instances, these determinations would be made solely by the U.S. Department of Education, without requiring the government to prove in court that the employer has in fact broken any law.”

The group argued that the department “lacks authority to impose these new, politically-charged, subjective conditions on the definition of public service employment for the PSLF program" and would lead to significant uncertainty for borrowers about whether they could actually receive student loan forgiveness under the program. Since PSLF is a significant benefit for attorneys to take low-paying legal service jobs serving low-income communities, the overhaul “would lead to a reduction of essential civil legal aid services necessary to the long-term health and safety of low-income communities across the country.”

A coalition of another 250 organizations including labor unions, LGBTQ rights groups, and immigration services organizations submitted a separate comment to the department, also arguing the proposal to restrict student loan forgiveness is illegal and dangerous.

“This is blatantly unconstitutional, illegal, and harmful to millions of borrowers across the country, including those working to support historically marginalized communities,” wrote the group. "This proposed rule is a clear, unlawful attempt to weaponize the PSLF program in an effort to intimidate and punish governments and 501(c)(3) organizations whose work does not fall in line with the Trump Administration’s agenda.”

The coalition also raised constitutional concerns, arguing that, “Ideologically targeting protected conduct is a clear violation of the First Amendment freedoms of speech and association, and is a blatant attack on civil liberties and individual rights."

Student Loan Forgiveness Overhaul For PSLF Proceeds

The proposed regulations that would cut off organizations from student loan forgiveness under PSLF are not in place yet. But the completion of the public comment period represents the conclusion of a critical next step, and brings implementation of the rules closer to reality. The Department of Education is expected to publish a final version of the regulations later this fall. And the regulations are then expected to go into effect by July of next year; any limitations on student loan forgiveness would not be retroactive to before a department determination.