Education Dept Narrows PSLF Eligibility, Bars Employers

The Education Department finalized and published a rule on Oct. 31, 2025 that narrows eligibility for Public Service Loan Forgiveness by allowing the department to bar employers it finds to have a substantial illegal purpose; the rule takes effect July 1, 2026 and will stop employees of disqualified organizations from earning PSLF credit toward the 120 qualifying payments. The rule lists activities that could trigger disqualification, including aiding or harboring undocumented immigrants, supporting terrorism, child trafficking, illegal discrimination, and providing certain gender-affirming medical care to minors (described in some accounts as puberty blockers or hormone therapy). The administration says the rewrite restores PSLF’s original intent, protects taxpayer funds and refocuses benefits on teachers, first responders and civil servants, a rationale publicly echoed by Under Secretary Nicholas Kent and tied to President Trump’s March executive order. Critics, including borrower- and student-advocacy groups and legal analysts, say the rule politicizes the program and will target nonprofits that serve immigrants and transgender people, and several groups have announced or promised legal challenges. The rule grants the education secretary authority to block employers (not individual employees) and provides appeal procedures for organizations, but leaves key terms such as substantial illegal purpose vague, a legal uncertainty likely to drive litigation.