The Public Service Loan Forgiveness (PSLF) program has served as a financial lifeline for millions of Americans working in government and non-profit roles. Since its creation in 2007, it has promised full federal student loan forgiveness to borrowers who commit a decade of service in eligible public sector jobs. For many, this program has not only shaped long-term career decisions but also offered a path to financial stability.
Now, the future of PSLF is under scrutiny. A newly finalised rule from the U.S. Department of Education, directed by an executive order from President Donald Trump, is set to take effect in July 2026. The change will redefine who qualifies for debt relief based on their employer’s status, raising questions about fairness, legality and the potential politicisation of a decades-old benefit.
Shifting Rules for a Long-Standing Federal Benefit
The Public Service Loan Forgiveness (PSLF) program, introduced in 2007, was designed to cancel student loan debt for borrowers who dedicate ten years of service to government or qualifying non-profit roles. With approximately seven million borrowers currently enrolled, it remains a critical pathway to debt relief for teachers, healthcare workers, military personnel, and civil servants.
The U.S. Department of Education has now finalised a major regulatory change, set to come into effect in July 2026, that would significantly alter which employers are considered eligible under the PSLF program. This move, following a March executive order from President Donald Trump, has raised concern among borrowers and advocacy groups about the politicisation of public service definitions and its possible consequences on access to debt relief.
Redefining Public Service Under New Federal Rule
At the heart of the change is a revised definition of what constitutes a “qualifying employer.” Until now, eligibility was broadly extended to most government and non-profit entities. Under the new regulation, however, the Department of Education intends to exclude employers found to engage in “substantial illegal activity,” including those supporting terrorism or offering gender-affirming care, according to a fact sheet released by the department.
The change was finalised at the end of October 2025. It follows the Trump administration’s directive to the education secretary to review and refocus PSLF benefits toward what it describes as “true public service”. Under Secretary of Education Nicholas Kent stated that the aim is to ensure federal support is directed to “teachers, first responders, and civil servants who tirelessly serve their communities,” according to Business Insider.
Once the rule takes effect, employers flagged by the department will be given an opportunity to rebut the findings. Borrowers working for these employers will be notified, but they will not be allowed to appeal on their own behalf. Payments made during the disqualified period will not count toward forgiveness, though previously counted payments will remain valid. Employers may regain eligibility by either waiting 10 years or entering a corrective action plan approved by the Department.
Legal Challenges and Borrower Concerns
Shortly after the rule was published, a coalition of advocacy organisations and non-profits filed lawsuits challenging its legality. According to the same source, the plaintiffs argue that the new criteria could be used to exclude organisations based on ideological grounds, thereby undermining the original bipartisan intent of the PSLF program. They also claim it could negatively impact recruitment and retention in sectors already facing staffing shortages.
Some lawmakers have also voiced opposition. Senator Bernie Sanders wrote on social media in November that the administration “does not have the right to take away student debt forgiveness from teachers, nurses, veterans and other public servants if they do not show loyalty to your right-wing political agenda.”
Meanwhile, student-loan servicers including Aidvantage have confirmed that current PSLF operations remain unchanged. “For now, there are no impacts to borrowers, payment counts, or discharges,” the company posted on its official website. Yet uncertainty remains for many borrowers, including Megan Flocken, a non-profit worker who told Business Insider, “I’m counting my lucky stars that there’s still the possibility that this PSLF program will remain intact because I have dedicated my whole professional life to public service.”
As the implementation date draws closer, the future of the PSLF program will likely continue to be contested in courts and Congress, with real implications for millions of borrowers who have built their careers around its promise.
