US Education Dept Plans Tightened Eligibility for Public Service Loan Forgiveness Targeting Certain Nonprofits

The Trump administration has finalized new rules for the Public Service Loan Forgiveness (PSLF) program that will exclude organizations deemed to have a "substantial illegal purpose," such as those supporting terrorism, aiding illegal immigration, or engaging in certain advocacy activities related to transgender rights and immigration. This change narrows the definition of qualifying employers, especially impacting nonprofits involved in politically or legally contested areas, with the policy set to take effect on July 1, 2026. While government agencies and traditional charities are less likely to be disqualified, advocacy-heavy nonprofits face higher scrutiny, and employees of excluded organizations will no longer accrue qualifying payments toward loan forgiveness from the date of disqualification. Critics argue the rule politicizes the program and could harm essential public service sectors like healthcare, education, and social work by removing loan forgiveness benefits. The new regulations allow for appeals and potential reentry for organizations after corrective actions, but legal challenges are expected to contest the rule's implementation. Borrowers are advised to update employment certifications and verify their employer's status to secure current PSLF eligibility before the new rule takes effect.