The Department of Education is finalizing the PSLF rule change

US Department of Education Announce On October 30, 2025, it will move forward with a final rule to amend the Public Service Loan Forgiveness (PSLF) program — a major change to one of the government’s most important student loan forgiveness initiatives.

The rule follows Executive Order 14235, signed by President Trump in March 2025, which directs the Department to return PSLF “to its lawful purpose” by excluding organizations engaged in illegal or harmful activities from receiving indirect taxpayer subsidies. While this appears practical on the surface, definitions and implementation matter to borrowers.

Originally enacted in 2007 to encourage public service careers by forgiving student loans after 10 years of employment and qualifying payments, the PSLF program has long been criticized for administrative confusion, high denial rates, and changing eligibility criteria.

The department says the rule “restores integrity” by ensuring that leniency only benefits those who work in statutory public service institutions.

What are the rule changes?

Under the new regulations published in Federal Register On October 31, 2025 (PDF file) Administration officially Amends section 685.219 From Section 34 of the Code Code of Federal Regulations. New definition of “qualified employer” Excludes organizations that engage in illegal activities So that they have a “significant illegal purpose.”

The rule identifies specific types of illegal conduct that could result in disqualification:

• Aiding and abetting violations of federal immigration laws.
• Supporting terrorism or using violence to influence federal policy.
• Performing surgical or chemical castration or mutilation on minors in violation of the law.
• Trafficking of minors across state lines for illegal emancipation.
• Repeated violations of state laws or aiding unlawful discrimination.

The department will determine whether an employer has a “substantial unlawful purpose” by using a Preponderance of evidence standard. Final verdicts, guilty pleas, or settlements that acknowledge illegal conduct may serve as conclusive evidence.

Employers found unqualified Resubmit the application after 10 years Or seek to Restoration of eligibility through a corrective action plan Approved by the Secretary.

Impact on borrowers and employers

For current PSLF participants, management has emphasized this rule This will not retroactively disqualify any prior pay or months of employment. Borrowers will continue to receive credit until the effective date of the employer exclusion decision.

However, yet July 1, 2026any borrower who works for an ineligible employer will not be able to accumulate qualifying payments unless they change jobs. The Department will provide notifications to both employers and borrowers if the status of the organization changes and update it PSLF utility database Within 30 days of any decision.

Employers will be provided with notice and an opportunity to respond during the selection process. However, this rule does not contain a path for borrowers to appeal.

Reaction to the rule

Public comments on the proposed rule, first published in August 2025reflects a divided response. From approx 14,000 comments After its introduction, supporters described the rule as a long-overdue safeguard to prevent taxpayer dollars from supporting illegal activity. Critics, including advocacy and legal aid organizations, warned that the broad language could create confusion, impede legal advocacy work, or inject political considerations into PLF eligibility decisions.

The Department rejected claims that the rule is politically motivated or unconstitutional, asserting that the Higher Education Act grants broad authority to regulate Title IV loan programs. It also cited long-standing legal principles, such as the IRS’s “illegality doctrine,” as justification for denying benefits to organizations engaged in illegal activity.

While acknowledging that some borrowers may lose access to PSLF if their employers are later deemed ineligible, the department said this outcome is outweighed by “The federal government’s interest is to ensure that taxpayer dollars are not used to support illegal behavior.“

In a Joint statement Written by “Protecting Borrowers and Democracy Forward,”This is a direct and unlawful attack on nurses, teachers, first responders and public service workers across the country. Congress created the Public Service Loan Forgiveness (PSLF) program because it is important to our democracy that we support the people who do the hard work of serving our communities. This new rule represents a cowardly attempt to usurp the power of the Legislature in an unconstitutional power grab designed to punish people who hold political views that differ from those of the administration. In our democracy, the president does not have the power to veto Congress. That’s why we will soon see the Trump Vance administration in court.“

What will happen next?

The Ministry appreciates this Less than ten organizations per year will be affected by the rule. Most borrowers will see no change in their PSLF eligibility, provided their employers remain in good legal standing.

The rule represents one of the Trump administration’s most significant setbacks to the Biden-era PSLF expansions, which temporarily expanded eligibility through pandemic-era waivers. These waivers, which accounted for previously ineligible payments, resulted in more than 850,000 borrowers receiving PSLF relief through 2024.

PSLF borrowers should remember that no changes will occur until after July 1, 2026, at the earliest. Even in this case, there is a process that must take place before the employer can be disqualified. Finally, qualifying payments cannot be withdrawn retroactively – they will only apply to future payments after the final selection date.

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