Trump Administration Restricts Student Loan Forgiveness for Certain Nonprofits
The U.S. Department of Education will bar employees of organizations with a substantial illegal purpose from the Public Service Loan Forgiveness program starting July 2026.
The United States Department of Education finalized a rule on October 30, 2025, that expands its authority to exclude nonprofit and public employers from the Public Service Loan Forgiveness (PSLF) program. The regulation targets organizations deemed to have a "substantial illegal purpose," including those that provide gender-affirming care for minors—which the administration describes as "chemical castration"—aid undocumented immigrants, or support terrorism and child trafficking.
Set to take effect on July 1, 2026, the policy follows a March executive order from President Donald Trump. The Education Secretary may independently disqualify employers using a "preponderance of the evidence" standard or based on court rulings. While current borrowers retain credit for time served at disqualified organizations until the July deadline, they will be unable to earn further credit after that date. Employers may appeal disqualifications through corrective action plans.
Under Secretary of Education Nicholas Kent defended the rule, stating the program should not subsidize law-breaking organizations. However, the move has drawn sharp criticism from a coalition of over 250 organizations and the American Bar Association. Opponents, including Democracy Forward and Protect Borrowers, describe the rule as an unconstitutional power grab and a weaponization of student debt. These groups, along with the National Student Legal Defense Network, have announced plans to sue the administration to block the rule.
