Student Loan Update: Trump Admin Making Major Change to Forgiveness Program

Newsweek

6 hours ago

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President Donald Trump's administration unveiled plans for a significant overhaul of the Public Service Loan Forgiveness (PSLF) program, the Associated Press reported on Monday.
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.
Newsweek has reached out to the Department of Education (ED) for comment via email on Monday.
Why It Matters
PSLF, which was established in 2007, allows government employees, including teachers, firefighters, and many who work for nonprofits, to have their student loans canceled after they've made payments for 10 years.
The proposed changes from the White House, if implemented, have advocates warning of potential unintended consequences and increased uncertainty for borrowers whose loan forgiveness depends on their employers' continued eligibility.
The ED's proposal follows an executive order signed by Trump in March and is currently moving through a regulatory process expected to conclude in July 2026.
What To Know
The Trump administration's planned PSLF revisions would allow the ED to remove loan forgiveness eligibility from organizations it determines have engaged in "illegal activities."
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 ED's draft proposal empowers the secretary 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.
Alyssa Dobson, financial aid director at Slippery Rock University, told the AP that the rule could be used against "entire cities and entire civil structures."
The ED convened a 10-person advisory panel to draft regulatory language for the PSLF overhaul.
Despite three days of negotiations, participants failed to reach consensus—leaving critical details undecided, USA Today reported.
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."
Amid regulatory controversy, technical issues have also surfaced.
The ED halted payment count tracking for income-driven repayment (IDR) and PSLF borrowers, reportedly due to system failures after laying off staff and facing reporting errors, Forbes reported.
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.
"Borrowers were left in the dark about their progress toward forgiveness. Add to that the layoffs within the Department of Education and the growing backlog of applications, and it's clear the system is under stress," Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek.
He added: "That said, much of the PSLF program was created by Congress—meaning executive orders alone can't fully dismantle it. While the administration may attempt to restrict access or redefine eligibility through regulatory changes, they can't eliminate the program without new legislation."
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 in Washington, D.C.
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 in Washington, D.C.
Photo byWhat People Are Saying
The Institute for College Access & Success told Newsweek in a statement: "We urge the Department to reverse course and ensure that PSLF eligibility is never subject to a political judgment by the Executive Branch alone. By doing so, the Department can match Congressional intent for the program and preserve guaranteed Constitutional freedoms for state and local governments, colleges, and non-profits across the nation."
Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: "Many borrowers are already in limbo, with little transparency into their loan status. As the administration appears focused on shrinking the department responsible for overseeing these programs, the process may become even more burdensome. My belief is that this administration wants borrowers to repay their loans—no exceptions—and will likely make forgiveness harder to achieve, regardless of circumstances."
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "Since being introduced in 2007, the Public Student Loan Forgiveness program has been one of the most popular tools the federal government has created for both helping students lessen their student debt and fill needed job roles in high poverty areas across the country."
"And while it appears the program will continue to exist, the new administration is taking steps to eliminate forgiveness privileges for certain organizations - be they nonprofits, hospitals, or even state governments - that are participating in illegal activities, though it's still not clear how this process will be implemented or exactly what activities qualify as illegal in the eyes of those revising the program."
What Happens Next?
The ED is currently soliciting public comments on the proposed PSLF regulations as the finalized rules are expected to be published and take effect next year.
In the meantime, borrowers and employers may need to monitor regulatory developments as changes to PSLF eligibility, processing systems, and administrative oversight are debated and finalized. Further disruptions and delays in loan forgiveness processing may continue as technical and policy adjustments unfold.