Proposed Rules on Public Service Loan Forgiveness Released

The Department of Education released proposed rules that would limit the ability of employers to qualify under the Public Service Loan Forgiveness (PSLF) program if they are found to be engaged in certain activities deemed to have a “substantial illegal purpose.”

Prompted by Executive Order 14235, issued in March, the proposed regulations would define activities having a substantial illegal purpose to include, among other things, violating immigration law, supporting terrorism, engaging in the chemical or surgical castration of children, and engaging in patterns of conduct that may run afoul of state or federal nondiscrimination laws or certain state tort laws. If finalized, borrowers working for organizations deemed to have violated the new rules 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.

Under the proposed regulations, the Department would determine whether a violation has occurred using a preponderance of the evidence standard. The Department would consider any final court ruling, guilty plea, or settlement to be conclusive evidence of a violation, although employers would have an opportunity to appeal.

The Department has presented these proposed measures as essential to upholding program integrity and ensuring taxpayer funds support lawful public service. However, the proposal has raised concerns in the higher education and nonprofit communities about how broadly the definitions may be applied and the potential implications for what that might mean for borrowers working at organizations that do not conform to the Trump Administration’s policy priorities.

The proposed regulations were developed via a negotiated rulemaking committee, which fell one vote short of consensus, clearing the way for the Department to publish proposed regulatory language of its own choosing. The deadline to submit comments on the proposed rules is September 17. If the Department publishes final rules by November 1, 2025, the new regulations will take effect on July 1, 2026.

For more information, please contact:
Jody Feder