Negotiated Rulemaking on Public Service Loan Forgiveness Fails to Reach Consensus

The Department of Education concluded its recent negotiated rulemaking to clarify which employers may qualify under the Public Service Loan Forgiveness (PSLF) program, with a particular focus on limiting the participation of organizations found to be engaged in activities deemed inconsistent with federal and state law.

The negotiated rulemaking committee fell one vote short of consensus, clearing the way for the Department to publish proposed regulatory language of its own choosing. During negotiations, however, the Department made multiple changes to its proposal, and these changes are likely to be reflected in the final rules.

Prompted by Executive Order 14235, issued in March, the new regulatory proposal would limit the eligibility of employers and organizations to qualify for PSLF that engage in a “substantial illegal purpose,” including violations of immigration law, certain criminal statutes, and patterns of conduct that may run afoul of state or federal nondiscrimination laws or certain state tort laws. If finalized, borrowers working for such organizations would not receive PSLF credit for those months of service and would not be eligible to seek reconsideration of that determination under the Department’s existing appeals process.

While the Department has framed these proposed changes as a way to uphold program integrity and ensure taxpayer funds support lawful public service, the proposal has raised questions within the higher education and nonprofit communities about how broadly the definitions may be applied and the potential implications for borrowers working in complex or mission-driven service settings. The proposal has drawn attention for its specific inclusion of provisions that could affect organizations serving undocumented immigrants and transgender individuals, prompting questions about how such definitions will be applied in practice.

Negotiated rulemaking is a process required by the Higher Education Act in which the Department convenes a committee of stakeholders to develop proposed regulatory changes through consensus-based discussion. If consensus is reached—or the Department proceeds without it — final rules must be published by November 1, 2025, to take effect on July 1, 2026. NAICU’s nominee to the committee, C. Todd Jones, president and general counsel of the Association of Independent Colleges and Universities of Ohio, represented the private, nonprofit sector during negotiated rulemaking.

For more information, please contact:
Jody Feder