Education Dept Finalizes Rule Narrowing PSLF Eligibility

The U.S. Department of Education finalized and published a rule on Oct. 31, 2025, narrowing eligibility for Public Service Loan Forgiveness (PSLF) by empowering the education secretary to exclude employers whose activities have a 'substantial illegal purpose.' The rule cites examples that could disqualify an employer — aiding violations of federal immigration laws, supporting terrorism, trafficking, 'aiding and abetting' illegal discrimination, and providing gender-affirming medical care to minors — and will take effect July 1, 2026. The department says the change restores PSLF to its original purpose and protects taxpayer funds, and that disqualified employers will receive notice and have a right to rebut. Critics, including borrower-advocacy groups and legal analysts, call the rule politically motivated, warn it could be used to target nonprofits that provide services to immigrants and transgender people, and predict immediate litigation. Officials and analysts say the restrictions are expected to affect workers at certain hospitals, schools, legal services, advocacy organizations and other nonprofits that have relied on PSLF. The rule follows President Trump's March executive order on PSLF.