Education Department moves to limit loan forgiveness for some nonprofit workers
Rule could block relief for employees at groups aiding immigrants, transgender youth or protesters
• The Education Department has finalized a rule narrowing which nonprofit employers qualify for Public Service Loan Forgiveness (PSLF), excluding those deemed to have a “substantial illegal purpose.”
• The regulation, effective July 1, could affect workers at nonprofits that help undocumented immigrants, provide gender transition care for minors, or organize public protests.
• Advocates and Democrats call the move political and discriminatory, while the Trump administration says it restores integrity to a program meant for traditional public servants.
Nonprofits face new scrutiny under PSLF rule
Employees of certain nonprofit organizations may soon find it harder to have their federal student loans forgiven under a new Education Department rule that redefines who qualifies for Public Service Loan Forgiveness.
The 185-page regulation, published Thursday, gives the education secretary power to disqualify entire employers — not individual workers — if the agency determines the organization engages in activities with a “substantial illegal purpose.” The rule takes effect July 1 and fulfills a directive from President Donald Trump’s March executive order targeting nonprofits that, in his words, support “illegal immigration, child trafficking, pervasive damage to public property and disruption of the public order.”
Targeted activities and examples
Among the activities listed as disqualifying: aiding violations of federal immigration law, supporting terrorism, performing gender transition procedures on minors in violation of state or federal law, trafficking children across state lines for emancipation, or engaging in organized violence to influence government policy.
That means nonprofits offering services to undocumented immigrants, providing gender-affirming care to minors, or participating in protest movements could lose their eligibility — and their employees’ past or future loan payments would stop counting toward forgiveness once their employer is disqualified.
Employers will be able to appeal removal from the program, but payments made after disqualification will not count toward the 120 qualifying payments required for forgiveness.
Supporters say rule restores focus; critics see politics
Undersecretary of Education Nicholas Kent said the regulation “refocuses the PSLF program to ensure federal benefits go to our nation’s teachers, first responders, and civil servants who tirelessly serve their communities.” Conservative lawmakers praised the move.
“The open-ended nature of PSLF has forced taxpayers — many of whom never went to college — to foot the bill for employees at radical organizations that violate state and federal laws,” said House Education Committee Chair Tim Walberg (R-Mich.).
But Democrats and borrower advocates warned that the change injects politics into a nonpartisan program that has already forgiven more than 1 million borrowers since its creation in 2007.
Rep. Robert C. “Bobby” Scott (D-Va.), ranking member on the House Education Committee, said the rule “follows the Trump Administration’s disturbing pattern of making repayment less affordable and taking money out of the pockets of hardworking families, all while attempting to police political speech.”
aylon Herbin, director of federal policy at the Center for Responsible Lending, issued the following statement:
“The PSLF regulation published today is the latest in a long list of cruel tricks imposed on workers and groups who hold views or serve people this administration doesn’t like,” said Jaylon Herbin, director of federal policy at the Center for Responsible Lending. “These restrictions will consign millions of student borrowers to decades of unaffordable debt repayment and will worsen existing shortages of teachers, police and emergency services workers, and nonprofits who help local residents thrive and contribute to building vibrant, economically resilient communities.”
A program with high stakes
Congress established PSLF under President George W. Bush to encourage graduates to enter public-service fields like teaching, social work and public health by canceling their remaining federal student loan debt after a decade of qualifying payments.
If the new rule withstands expected legal challenges, it could reshape the program’s reach across more than 20 economic sectors — and disrupt forgiveness for thousands of borrowers nearing the finish line.