Overview
- Final regulations published October 31 redefine qualifying employers for Public Service Loan Forgiveness to exclude organizations determined to have a substantial illegal purpose, with an effective date of July 1, 2026 unless courts intervene.
- A coalition of 22 state attorneys general filed suit on November 3 in the U.S. District Court for the District of Massachusetts seeking to vacate the rule and block enforcement, arguing it exceeds statutory authority and is arbitrary under the APA.
- The rule enumerates disqualifying activities, including aiding violations of federal immigration laws, supporting terrorism, certain gender‑affirming medical treatments for minors in violation of law, trafficking children for emancipation, patterns of aiding illegal discrimination, and patterns of violating state laws.
- Education will make determinations by a preponderance of the evidence, treat final judgments, guilty or nolo pleas, and settlements with admissions as conclusive evidence, provide an employer reconsideration pathway, and state that determinations do not affect IRS tax‑exempt status or penalize protected speech.
- Borrowers retain PSLF credit for service completed up to the Department’s ineligibility determination date, lose credit for subsequent months at a disqualified employer, will receive notice of employer status, and could be affected sector‑wide according to advocates who warn of impacts on LGBTQ workers and public‑service recruitment.