3 days ago
US Education Department's latest proposal could block student loan forgiveness for thousands of public workers
In a move that could reshape the Public Service Loan Forgiveness (PSLF) program, the Trump administration on Friday proposed new rules that would deny debt relief to public employees whose organisations are deemed to have engaged in activities with a 'substantial illegal purpose.
' The sweeping change could impact thousands of government and nonprofit workers including teachers, nurses, social workers, and university staff particularly in institutions working with immigrants or transgender youth.
The PSLF program, established by Congress in 2007, cancels remaining federal student loan debt for eligible borrowers after 10 years of qualifying payments while working full-time for government agencies or certain nonprofits.
It has long been promoted as a way to attract graduates to lower-paying but socially vital jobs.
Key changes in the proposal
Under the new plan, the Education Secretary would have the final say on whether an employer is excluded from PSLF eligibility, even without a court ruling. Decisions could be made using the legal standard of a 'preponderance of the evidence,' meaning it is more likely than not that the organisation engaged in the alleged illegal activity.
Activities defined as 'illegal' include:
Providing gender-affirming care to minors in states where it is banned — described in the proposal as 'chemical castration' through puberty-blocking medications or hormone therapy.
Engaging in or supporting illegal immigration.
Supporting foreign terrorist organisations.
If an employer is barred, the ineligibility would last for 10 years or until a corrective action plan approved by the Secretary is completed. Workers would have to change employers to continue accruing credit toward loan forgiveness.
Potential impact on schools, hospitals, and nonprofits
While the Education Department estimates that fewer than 10 organisations a year would be disqualified, it acknowledges that the impact would not be evenly distributed across sectors.
Schools, universities, healthcare providers, social workers, and legal aid organisations are seen as most at risk.
For example, in 27 states where gender-affirming care for minors is banned, public hospitals or clinics providing such services could be deemed ineligible, along with nonprofits advocating for immigrant rights. Even a legal settlement involving an admission of wrongdoing could trigger disqualification.
Criticism and political backlash
Opponents have accused the administration of weaponising student loan forgiveness against political adversaries. As reported by the Associated Press (AP), Kristin McGuire, CEO of the advocacy group Young Invincibles, called the plan 'a political stunt' that 'exploits the student loan system to attack political opponents' through an overly broad definition of illegal activity.
Legal experts also warn that giving the Education Secretary unilateral power to disqualify employers could lead to selective enforcement and lengthy legal challenges.
Civil rights groups are particularly concerned about the potential chilling effect on organisations serving LGBTQ+ youth and immigrant communities.
Public comment period and timeline
The proposal stems from a federal rule making process launched in June, during which a panel of education and policy experts failed to reach consensus, giving the Department leeway to draft its own version. While the revised text clarifies that organisations will not be barred solely for exercising their First Amendment rights, critics say it still leaves too much room for subjective interpretation.
The public has 30 days to comment before the rule can be finalised. If adopted, the changes would take effect in July 2026. Borrowers are advised to closely monitor their employer's eligibility status and seek guidance from loan servicers if they believe their organisation could be affected.
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