PSLF: Navigating New Waters

By Darius Spearman (africanelements)

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The Trump administration is proposing new regulations to restrict eligibility for the Public Service Loan Forgiveness (PSLF) program. These changes could potentially exclude entire organizations based on their activities (thecollegeinvestor.com). President Trump issued Executive Order 14235, titled “Restoring Public Service Loan Forgiveness.” This order directs the Department of Education to draft new rules (thecollegeinvestor.com). The proposed rules would allow the Department of Education to deny PSLF credit to borrowers. This would apply to those working at organizations deemed to have a “substantial illegal purpose” (thecollegeinvestor.com).

This definition of “substantial illegal purpose” could include several activities. These include providing healthcare services to transgender youth, violating state laws, facilitating violations of federal immigration policies, or engaging in discriminatory practices (thecollegeinvestor.com, time.com). The Department of Education’s draft language specifically mentions “illegal immigration, terrorism, chemical and surgical castration or mutilation of children, child trafficking, illegal discrimination, and a pattern of violating state laws” as examples of illegal activities (ed.gov). This new criterion could significantly narrow the scope of eligible employers. Organizations that focus on immigration rights, climate change, free speech advocacy, or diversity, equity, and inclusion practices could be targeted (naicu.edu).

Understanding “Substantial Illegal Purpose”

The proposed changes would amend PSLF regulations. This would exclude organizations that engage in activities with a “substantial illegal purpose” (ed.gov). Examples cited include violating federal immigration laws, supporting terrorism or child abuse, and engaging in a pattern of illegal discrimination (naicu.edu). The Department of Education’s draft language specifically lists “illegal immigration, terrorism, chemical and surgical castration or mutilation of children, child trafficking, illegal discrimination, and a pattern of violating state laws” (ed.gov). Concerns have been raised that this definition could be broadly interpreted. It might target organizations involved in politically sensitive issues. These include immigration rights, climate change, or diversity, equity, and inclusion practices (naicu.edu).

Critics argue these proposed changes could be used to politically target organizations. This could impact broad categories of employers, potentially affecting millions of borrowers. Winston Berkman-Breen, legal director at the Student Borrower Protection Center, warns about the broad scope. He suggests “illegal” actions targeted could disqualify public school systems teaching the history of slavery. Fire departments in sanctuary cities could also be affected (time.com). Concerns have also been raised about First Amendment implications. This includes the possibility of blocking organizations from PSLF based on the administration’s disapproval of their protected speech (marketwatch.com). A broad swath of employers could be affected. This includes legal-aid groups for undocumented immigrants, employees of sanctuary cities, and hospitals with youth gender clinics (marketwatch.com).

Executive Order 14235: A Policy Shift

Executive Order 14235, signed by President Trump, serves as the directive for the Department of Education to reshape the PSLF program (thecollegeinvestor.com). Its primary intent is to restrict which employers count as eligible for PSLF. It specifically targets organizations that the administration defines as having a “substantial illegal purpose” (thecollegeinvestor.com). This order signals a policy shift. It aims to align PSLF eligibility with the administration’s broader political agenda. This could potentially exclude organizations involved in activities it deems contrary to its policies. Some see the Executive Order as an attempt to “weaponize PSLF.” It could retaliate against workers and organizations that support marginalized communities or engage in work not aligned with the Trump administration’s agenda (protectborrowers.org).

The proposed changes are part of a negotiated rulemaking process. This involves an advisory committee and public comment periods. The Department of Education outlined its plan to change PSLF rules. This will involve a committee’s review (insidehighered.com). The department is not obligated to accept the committee’s changes. This is true unless there is unanimous agreement (insidehighered.com). After the committee’s work, the department will release proposed changes. They will then take public comment and review those comments before finalizing the rule (insidehighered.com). A panel of experts convened by the Department of Education from June 30 to July 2 drafted potential amendments. This included limitations and protections for First Amendment rights (time.com).

The Negotiated Rulemaking Process

The Department of Education convened a panel of experts from June 30 to July 2. Their task was to review the PSLF proposal and draft potential amendments (time.com). The negotiated rulemaking process involves stakeholders responding to the Department of Education’s intent. This is to establish rules to implement the Executive Order (protectborrowers.org). Following the negotiated rulemaking committee proceedings, the Department will begin drafting an NPRM. This will be for publication in the Federal Register for public comment (ed.gov). This process aims to create rules that are more widely accepted and less likely to face legal challenges.

Concerns about First Amendment implications arise because the proposed “substantial illegal purpose” rule could be broadly interpreted. It might disqualify employers based on activities protected under constitutional rights. These include free speech or association. Critics argue that the administration might target organizations involved in advocacy, protest, or educational activities it disagrees with. This could effectively punish public service workers for their employers’ lawful, but politically disfavored, actions. This could chill free speech and association. Organizations might self-censor to maintain PSLF eligibility for their employees. Experts have suggested limitations on the proposed changes. This includes protections for actions that fall within employees’ First Amendment rights (time.com). Organizations focusing on immigration rights, climate change, free speech and civil disobedience advocacy, and those utilizing diversity, equity, and inclusion practices could be targeted (naicu.edu).

First Amendment Concerns

The potential impact on First Amendment rights is a significant concern. A legal director at the Student Borrower Protection Center warns about the broad scope of “illegal” actions targeted by the administration. This could potentially disqualify public school systems from teaching the history of slavery. Fire departments serving sanctuary cities could also be affected (time.com). This raises questions about the legality of such changes. It also raises questions about whether they infringe upon constitutionally protected activities. The proposed rules could create a chilling effect. Organizations might avoid certain activities to ensure their employees remain eligible for PSLF. This could stifle important public discourse and advocacy.

While existing PSLF borrowers would not lose past qualifying payments, new employment eligibility restrictions could apply starting in 2026. The proposed changes would not retroactively remove past qualifying payments for current PSLF borrowers (thecollegeinvestor.com). However, new employment eligibility restrictions could take effect as early as 2026 (thecollegeinvestor.com). The specific details regarding the implementation timeline and how current borrowers will be affected during the transition remain largely undefined. The lack of detailed guidance on how the new rules will be applied to those already on the PSLF track, or what protections will be in place to ensure a smooth transition, creates uncertainty for many (naicu.edu).

Implementation Timeline and Transition

New employment eligibility restrictions could apply starting in 2026 (thecollegeinvestor.com). However, the specific details regarding the implementation timeline and how current borrowers will be affected during the transition remain largely undefined. It is currently unclear how these changes would impact currently certified PSLF enrollees (naicu.edu). This lack of clarity leaves many borrowers in limbo. They are unsure about their future eligibility. This also creates anxiety for those who have dedicated years to public service. They have done so with the expectation of loan forgiveness.

There is a significant backlog of PSLF buyback applications under the current administration. As of the end of June, approximately 65,448 PSLF buyback requests were pending with the government (cnbc.com). This backlog has worsened since May. At that time, nearly 59,000 applications were under review (cnbc.com). The Department of Education stated it is working through the backlog. They are also ensuring borrowers have submitted the required 120 payments of qualifying employment (cnbc.com). The term “buyback” in this context refers to a process where borrowers can make payments for periods that previously did not count towards PSLF. This allows them to “buy back” those months to reach the 120 qualifying payments sooner. The backlog indicates a significant administrative challenge. It also highlights the large number of borrowers seeking to benefit from the program.

PSLF Buyback Backlog

The increasing backlog of PSLF buyback requests indicates a growing demand for the program. It also highlights the administrative challenges in processing these applications. This backlog could further complicate the implementation of new rules. It could also create additional delays for borrowers seeking forgiveness. The Department of Education’s commitment to working through this backlog is crucial. This is especially true given the proposed changes. It ensures that borrowers who have met the requirements receive their earned forgiveness.

While the proposed changes to PSLF eligibility focus on excluding organizations with a “substantial illegal purpose,” a comprehensive description of which types of organizations currently qualify and how many might be excluded under the new rules is not available. The current PSLF program generally includes government organizations (federal, state, local, or tribal), and most non-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code. The new rules, however, could significantly narrow this scope by targeting organizations involved in politically sensitive areas, such as those focusing on immigration rights, climate change, free speech advocacy, or diversity, equity, and inclusion practices (naicu.edu). The lack of a clear and exhaustive list of potentially disqualified entities leaves many public service organizations and their employees uncertain about their future PSLF eligibility.

Scope of Affected Employers

The new rules target organizations that are deemed to operate a “substantially illegal purpose” (thecollegeinvestor.com). Organizations that focus on immigration rights, climate change, free speech, and civil disobedience advocacy, and those that utilize diversity, equity, and inclusion practices, could be targeted to have their eligibility for the program revoked (naicu.edu). Public school systems that teach the history of slavery or fire departments serving sanctuary cities could potentially be disqualified (time.com). This broad potential impact raises concerns about the future of public service. It also raises concerns about the ability of organizations to continue their work without fear of losing PSLF eligibility for their employees.

The proposed changes to the PSLF program represent a significant shift. They could impact millions of borrowers and the organizations they serve. The focus on “substantial illegal purpose” raises concerns about political targeting and First Amendment implications. While the negotiated rulemaking process allows for public input, the final decision rests with the Department of Education. The uncertainty surrounding implementation and the scope of affected employers adds to the anxiety for many. This is especially true for those who have dedicated their careers to public service. The ongoing backlog of buyback applications further complicates the situation. It highlights the need for clear and timely communication from the Department of Education. This is essential to ensure a fair and transparent process for all borrowers.

Potential Impact on Communities of Color

The proposed changes to the PSLF program carry significant implications for African American communities and social justice organizations. Many public service roles, such as educators, healthcare workers, and legal aid providers, are disproportionately filled by individuals from these communities. If organizations that teach the history of slavery in public schools are deemed to have a “substantial illegal purpose,” it could directly impact African American educators and students. This could also affect the curriculum and the ability to teach comprehensive history (time.com).

Furthermore, social justice organizations, including those focused on civil rights, immigration rights, and diversity, equity, and inclusion, are often critical to advocating for and serving marginalized communities. If these organizations lose their PSLF eligibility, it could deter individuals from pursuing careers in these vital areas. This could also reduce the capacity of these organizations to provide essential services. The potential for these rules to be used as a “litmus test” based on political alignment raises concerns about the weaponization of a program designed to support public servants. This could have a chilling effect on advocacy and public service within communities of color (protectborrowers.org).

ABOUT THE AUTHOR

Darius Spearman has been a professor of Black Studies at San Diego City College since 2007. He is the author of several books, including Between The Color Lines: A History of African Americans on the California Frontier Through 1890. You can visit Darius online at africanelements.org.