Student Loan Forgiveness programs to undergo massive changes under Trump 2.0. Are you at risk?

Time of India

08-07-2025

President Donald Trump is going to make a significant transformation of the
Public Service Loan Forgiveness
(PSLF) program. The proposed changes arrive based on concerns that federal funds have been used to support organizations that the administration views as acting outside the law.
This has sparked fear that it will become a tool for political retribution, taking aim at organizations that serve immigrants and transgender youth.
What is Public Service Loan Forgiveness program?
Established in 2007, PSLF allows government employees, such as teachers and firefighters, plus many who work for nonprofits, to have their student loans canceled after they've made payments for 10 years. Government employees, healthcare workers, nonprofit staffers, and public defenders have all relied on PSLF and more than one million borrowers have already benefited from or are working toward forgiveness under it.
Congress established the program in 2007 to motivate college graduates to pursue careers in the public sector, where pay is typically lower than in private industry. Under the program, borrowers who make 120 qualifying monthly payments while employed by any level of government are eligible to have their remaining student loan debt forgiven. Nonprofit employees can also qualify—provided their work focuses on areas such as public interest law, public health, or education.
What are the proposed changes?
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The proposed changes from the White House, if implemented, would allow the Education Department to remove loan forgiveness eligibility from organizations it determines have engaged in "illegal activities." The overhaul in the policy would strip the benefit from organizations involved in 'illegal activities,' with the final determination left up to the US education secretary. A draft proposal released by the department includes definitions of illegal activity that center on immigration, terrorism and transgender issues.
Definitions within the draft rules, including those related to immigration, terrorism, and transgender issues, have prompted concerns from advocates and education professionals about the potential for subjective or politically motivated enforcement. The draft proposal by the Education Department gives the secretary the power to determine which organizations have engaged in "illegal activities" and should be disqualified from PSLF.
The proposal's focus includes organizations that allegedly aid federal immigration law violations, support foreign terrorist organizations, or contravene anti-discrimination statutes. 'That's definitely an indicator for me that this is politically motivated and perhaps will be used as a tool for political punishment,' Betsy Mayotte, president of the Institute of Student Loan Advisors and one of the advocates asked to review the policy as part of a rulemaking process, told AP.
The ED convened a 10-person advisory panel to draft regulatory language for the PSLF overhaul.
Who are at risk?
If the proposed changes come into place, hospitals, schools and nonprofit organisations could be at risk. The proposal's definitions of illegal activity largely mirror those laid out by Trump. They include 'aiding or abetting' in the violation of federal immigration law, and supporting any group designated as a foreign terrorist organization. Also considered illegal is 'engaging in the chemical and surgical castration or mutilation of children in violation of Federal or State law.' It says that includes the use of hormone therapy or drugs that delay puberty. It defines children as those under 19.
Entire hospital systems could become ineligible if a single department provides certain care to transgender youth. Cities with sanctuary policies or public schools promoting diversity and inclusion programs could be flagged under the new rules. Workers who have spent years working toward loan forgiveness may abruptly lose eligibility. Organizations would also be required to certify each year that they are not participating in any prohibited activities.
Some borrowers fear they may now be forced out of PSLF eligibility due to their employers' activities.
"For those currently enrolled in PSLF, now is the time to stay informed and connect with the entity overseeing your participation," Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek. "While not all organizations will be affected, some could, and you don't want to be caught in a situation where the rules for forgiveness change, and you're unsure if you and your employer still qualify."
Borrowers are unable to monitor progress toward forgiveness, and significant delays have emerged in updating PSLF statuses. While the PSLF tracker on StudentAid.gov remains online, updating remains inconsistent, further contributing to borrower uncertainty, according to Forbes.
The Department of Education is currently preparing the final rule for public comment. If adopted, the changes would take effect in July 2026.