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Education Department Seeks to Bar PSLF Employers Under Broad ‘Illegal Activities’ Rule

Open for public comment, the draft rule grants the education secretary sweeping power to disqualify nonprofits, hospitals and government employers under a broad ‘illegal activities’ definition.

President Donald Trump walks toward the media to speak with them before boarding Air Force One, at Morristown Municipal Airport in Morristown, N.J., Sunday, July 6, 2025, en route to Washington after a weekend in New Jersey. (AP Photo/Jacquelyn Martin)
U.S. President Donald Trump answers questions during a press conference on recent Supreme Court rulings in the briefing room at the White House on June 27, 2025 in Washington, DC.
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Overview

  • The proposal’s draft defines “illegal activities” to include aiding federal immigration law violations, supporting designated terrorist organizations, Civil Rights Act breaches and gender-affirming care for minors.
  • It would allow the education secretary to strip Public Service Loan Forgiveness eligibility from employers without requiring criminal convictions or legal settlements.
  • Advocates warn the criteria could be used as a political tool to punish organizations serving immigrants and transgender youth.
  • Public servants at hospitals, nonprofits and government agencies risk losing progress toward loan cancellation and may need to change jobs or forfeit relief.
  • The rule opened for public comment on July 7 and is slated for finalization by July 2026 before taking effect.