On Thursday, the Trump administration finalized a new set of regulations aimed at tightening employer eligibility for the Public Service Loan Forgiveness (PSLF) program, which offers student debt cancellation to borrowers who work in public service (e.g., teachers, community health care professionals, and public defenders) and make qualifying monthly payments for at least a decade.

The Education Department received nearly 14,000 comments on the proposed rule within the 30-day comment period that began when it was published in the Federal Register on August 18.

Between the Lines

The final rule, which takes effect July 1, 2026, will change the definition of a “qualifying employer” to exclude organizations engaging in “unlawful activities.” Disqualifying activities include providing certain health care services to transgender youth, supporting terrorist organizations, facilitating the violation of federal immigration laws, and engaging in patterns of “illegal discrimination,” among others.

The Secretary of Education will determine whether or not employers are in compliance based on a “preponderance of evidence.” The rule will only be applied prospectively, meaning borrowers who have been making qualifying payments will not lose credit for those payments if their employer is disqualified from the PSLF program after the rule goes into effect.

The Education Department encourages borrowers and employers to take “any necessary actions” to be in compliance with the new regulations and retain PSLF eligibility.

What They’re Saying

Proponents of the final rule say that it will restore public confidence in PSLF and prevent misuse of the student loan forgiveness incentive.

  • “With this new rule, the Trump Administration is refocusing the PSLF program to ensure federal benefits go to our Nation’s teachers, first responders, and civil servants who tirelessly serve their communities,” said Under Secretary of Education Nicholas Kent in the Department’s press release.
  • Rep. Tim Walberg (R-Mich.), Chairman of the House Committee on Education and Workforce, said in an official statement: “Unfortunately, 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. This new rule… [prevents] taxpayer dollars from paying the student loans of those undermining the rule of law.”

Opponents argue that the final rule is overly vague, opens the door for executive overreach, and risks employer eligibility being based on the ideology of the administration in power.

  • Yesterday, Rep. Robert “Bobby” Scott (D-Va.), Ranking Member on the House Committee on Education and Workforce, responded to the final rule: “Individuals who have dedicated their lives to giving back to their communities do not deserve their hard-earned loan forgiveness to be ripped away from them on a political whim. This 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.”
  • Physician groups including the American Academy of Family Physicians, the American Academy of Pediatrics, and the American College of Physicians shared that they are “deeply concerned” about the final rule, asserting that PSLF makes it possible for medical graduates to pursue primary care and psychiatry careers in high-need areas, and protects them from outsized debt.
  • Democracy Forward (a national legal organization) and Protect Borrowers (a student borrower advocacy group) said in a joint statement: “This new rule is a craven attempt to usurp the legislature’s authority in an unconstitutional power grab aimed at punishing people with political views different than the administration’s.”

What’s Next

Legal challenges are expected as early as next week. Barring any court injunctions, the Education Department’s final rule will go into effect next summer. Our team will be closely tracking related lawsuits as they are filed.

This article is sourced from Whiteboard Notes, our weekly newsletter of the latest education policy and industry news read by thousands of education leaders, investors, grantmakers, and entrepreneurs. Subscribe here.