Key Takeaways
- The U.S. Department of Education has finalized a new rule tightening eligibility for the Public Service Loan Forgiveness (PSLF) program.
- Organizations with a “substantial illegal purpose” will be barred, affecting some nonprofits working with immigrants or transgender youth.
- Supporters say the move protects taxpayer funds, while critics call it politically motivated and harmful to public workers.
- The rule takes effect on July 1, 2026, following an executive order by President Donald Trump.
- Legal challenges from advocacy groups are expected.
Trump Administration Narrows PSLF Eligibility to Exclude “Illegal” Activity
The U.S. Department of Education has issued a final rule redefining which organizations qualify for the Public Service Loan Forgiveness (PSLF) program, a taxpayer-funded initiative created in 2007 to relieve federal student debt for Americans working in public service.
Under the new rule, announced Thursday, organizations that engage in activities deemed to have a “substantial illegal purpose” will no longer qualify. According to the Department, the change ensures PSLF benefits only go to workers serving “the public good” rather than those involved in unlawful conduct such as supporting terrorism or aiding illegal immigration.
“Taxpayer funds should never subsidize illegal activity,” said Under Secretary of Education Nicholas Kent, emphasizing that the policy aims to protect teachers, first responders, and other lawful public servants.
Find Out: How to Get Loans for GED Classes & College
Critics Warn of Political and Legal Consequences
The Associated Press reported that the policy could exclude some nonprofits that assist immigrants or provide gender-affirming care for minors—activities now restricted in several states. Critics, including the legal nonprofit Student Defense, argue the administration is using the program to “punish public servants for their employers’ perceived political views.”
Professional groups such as the American Bar Association and the National Council of Nonprofits have voiced concern that the broad authority granted to the Education Department could allow decisions based on ideology, potentially undermining public service sectors like law, health care, and education.
Supporters, including House Education Committee Chair Rep. Tim Walberg (R-Mich.), praised the move, saying it prevents federal dollars from “covering loan relief for radical organizations that violate the law.”
The rule will take effect in July 2026, with organizations allowed to reapply after 10 years or sooner if they complete a corrective plan.
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