Proposal Seeks to Revise Eligibility Criteria for Public Service Loan Forgiveness

The Department of Education announced that its upcoming negotiated rulemaking session, scheduled for June 30–July 2, will include a proposal to revise the eligibility criteria for the Public Service Loan Forgiveness (PSLF) program. The proposed changes are intended to clarify which employers may qualify under the program, with a particular focus on organizations found to be engaged in activities deemed inconsistent with federal and state law.

Prompted by Executive Order 14235, issued in March, the Department’s draft regulatory language would limit the eligibility of employers and organizations to qualify for PSLF that, in the Department’s view, engage in a “substantial illegal purpose.” This includes newly defined terms such as violations of immigration law, certain criminal statutes, and patterns of conduct that may run afoul of federal nondiscrimination protections or state civil laws. If finalized, borrowers working for such organizations would not receive PSLF credit for those months of service, effective July 1, 2026, 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.

For more information, please contact:
Jody Feder