Trump Administration Unveils Sweeping Student Loan Forgiveness Restrictions

The Trump administration this week proposed sweeping new restrictions on student loan forgiveness for public service borrowers, potentially threatening to shut down debt relief for millions of people based on the activities of the organizations they work for.

The newly unveiled regulations would limit relief under the Public Service Loan Forgiveness program, which offers student loan forgiveness for borrowers who devote at least 10 years to working for qualifying nonprofit organizations or government entities. The Department of Education released proposed rules on Tuesday that would block PSLF for entire organizations or governments that the administration determines are engaged in activities that have a “substantial illegal purpose.”

Advocacy groups slammed the draft regulations as an illegal and unfair attempt to weaponize the PSLF program against organizations and state governments that run afoul of the Trump administration’s policy priorities. The groups have warned that if the rules are successfully implemented, many borrowers would be cut off from student loan forgiveness. Here’s the latest.

New Rules Would Restrict Student Loan Forgiveness Under PSLF

The Department of Education’s release of the new PSLF regulations follows an executive order President Trump issued in March, instructing the department to draft new rules to curtail student loan forgiveness under the program.

“Instead of alleviating worker shortages in necessary occupations, the PSLF Program has misdirected tax dollars into activist organizations that not only fail to serve the public interest, but actually harm our national security and American values, sometimes through criminal means,” said Trump in the order. “The PSLF Program also creates perverse incentives that can increase the cost of tuition, can load students in low-need majors with unsustainable debt, and may push students into organizations that hide under the umbrella of a non-profit designation and degrade our national interest, thus requiring additional Federal funding to correct the negative societal effects caused by these organizations’ federally subsidized wrongdoing.” Trump provided no evidence to substantiate his assertions.

The proposed new PSLF regulations unveiled this week would make sweeping restrictions on student loan forgiveness eligibility based on whether an organization’s activities have a “substantial illegal purpose.” The Trump administration would define “substantial illegal purpose” to include:

• Providing healthcare to transgender people under the age of 19, including prescribing puberty blockers or hormone therapy;
• “Aiding or abetting” violations of federal immigration laws;
• “Engaging in a pattern of aiding and abetting illegal discrimination,” which the administration could interpret to mean advancing diversity, equity, and inclusion programs; and
• “Engaging in a pattern of violating State tort laws,” which can include creating a “public nuisance.”

Under the proposed rules, which would be effective as of July 1, 2026, the Department of Education would prevent borrowers from receiving PSLF credit toward student loan forgiveness for employment with any organization found to be engaged in these activities. The regulations would allow the department, via the Secretary of Education, to make a determination of PSLF employment eligibility based on a “preponderance of the evidence.” The rules would also expressly prevent student loan borrowers from contesting any determination of employer PSLF eligibility.

Advocacy Groups Slam New Student Loan Forgiveness Rules As Vast Government Overreach

Student loan borrower advocacy organizations criticized the new PSLF rules as an unlawful government overreach that could cut off student loan forgiveness for potentially millions of borrowers who work for nonprofit organizations and state or municipal governments that run afoul of Trump administration policy priorities. The Student Borrower Protection Center characterized the draft regulations as “thinly-veiled fascism” that would allow Secretary of Education Linda McMahon “to police the ways in which state, county, municipal, and tribal governments and non-profit organizations serve their communities’ needs.”

“The law does not empower the Secretary of Education to opine on the supposed illegality of a public service employer’s mission—an unprecedented exercise of executive power that extends far beyond the Higher Education Act,” said SBPC Executive Director Mike Pierce in a statement on Tuesday. “This proposal empowers Secretary McMahon to block all government workers with student debt, including first responders, social workers, and teachers, from receiving Public Service Loan Forgiveness in retaliation if she decides that a local or state government policy conflicts with her extreme, right-wing views on immigration, civil rights, or free speech.”

Previously, a coalition of nearly 200 advocacy groups (including labor unions and civil rights organizations) warned that the Trump administration’s attempts to limit student loan forgiveness under PSLF could have major implications for borrowers.

“Efforts to limit access to or weaponize PSLF will threaten critical public service fields and harm our most vulnerable communities” the coalition wrote in a letter submitted to the Federal Registrar last month. “We were incredibly troubled to see President Trump’s executive order aimed at limiting access to PSLF for public service workers employed at organizations engaging in work that is not in line with President Trump’s agenda. The Department’s efforts to engage in rulemaking to make 2 unlawful changes to PSLF eligibility are directly related to the goals of this executive order, exceed the Administration’s authority outright, and have already had a chilling effect on public service organizations doing necessary work on behalf of our most vulnerable communities.”

What Comes Next For PSLF As New Student Loan Forgiveness Rules Advance

For now, the PSLF regulations have not been finalized. The Department of Education must continue with negotiated rulemaking – a lengthy process that requires public input and the convening of a committee of key stakeholders that must evaluate the proposal. However, some critics have argued that the department’s negotiated rulemaking committee is being stacked against the interests of borrowers pursuing student loan forgiveness.

In the meantime, some student loan borrower legal groups have threatened to sue the Trump administration if the proposed rules restricting student loan forgiveness under PSLF ultimately go into effect.

“Threatening to punish hardworking Americans for their employers’ perceived political views is about as flagrant a violation of the First Amendment as you can imagine,” said National Student Legal Defense Network President Aaron Ament in March, following President Trump’s executive order. “If the Trump Administration follows through on this threat, they can plan to see us in court.”

Note: The author previously worked with National Student Legal Defense Network on an unrelated student loan-related case.