The New Rules Governing Restricting Student Loan Forgiveness For PSLF

Forbes

The Trump administration on Friday released for public inspection new regulations designed to limit student loan forgiveness under the Public Service Loan Forgiveness program. The publication does not mean the rules are in effect yet. But it does move the process to restrict PSLF one step closer to reality, with major implications for millions of federal student loan borrowers.  0:00 Introduction 0:34 What Are The Proposed Changes? 4:35 The History Of Public Service Loan Forgiveness 6:44 What Will Happen To Enrollees In The Program? 7:52 How Will This Affect The Program Long Term 8:46 What To Look Out For  Read the full story on Forbes: https://www.forbes.com/sites/adamminsky/2025/08/15/department-of-education-publishes-new-rules-restricting-student-loan-forgiveness-for-pslf/  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00Hi, everyone. I'm Maggie McGrath, senior editor at Forbes. The Trump administration has proposed

00:09new rules around public service loan forgiveness that could ultimately limit the number of people

00:17who access this type of loan forgiveness. Joining us now is Adam Minsky. He is a Forbes senior

00:24contributor and a lawyer who focuses on student loans, and he's been covering this issue for

00:29Forbes.com. Adam, thank you so much for joining us. Thanks for having me on, Maggie. So you have an

00:36article out basically breaking down the proposed changes to the federal public service loan

00:44forgiveness program. Can you start off by telling us what is the Trump administration proposing here?

00:50Yeah, so basically public service loan forgiveness is a federal student loan program designed to

00:56forgive the debt for borrowers who commit to working for 10 years or longer in nonprofit or

01:04government fields. It's designed to incentivize work in those types of settings. What the proposed

01:10new regulations do is it would allow the Department of Education to cut off from the PSLF program

01:17employers that engage in what the administration deems to be substantial illegal activity. It

01:26essentially would give the Department of Education power to eliminate from eligibility entire

01:32organizations, including potentially state and local governments, as well as academic institutions and

01:38other nonprofits, if they run afoul of these proposed new rules. Now you say substantial illegal

01:46activity or substantial illegal purpose. And when I hear that phrase, I tend to think of something like

01:51drug trafficking and felonies. And in reading your piece, it seems to me that the Trump administration

01:59is not necessarily referring to things that classically fall under illegal activity. Can you break down what

02:06the administration is defining as illegal in these cases? Yeah, so it certainly is not necessarily what

02:14you might think. So according to these rules, which are intended to implement in earlier executive order that

02:20President Trump signed back in March, there are several categories of activities that the Department of

02:28Ed would consider to potentially fall into this sort of umbrella of having a substantial legal purpose. This

02:35includes providing certain types of health care services to transgender youth, facilitating the violation of

02:43federal immigration laws, engaging in activities that facilitate legal discrimination, and violating state law. Now, that

02:55might sound to some extent, you know, reasonable or not reasonable, you know, depending on your perspective. But

03:01critics argue that this essentially gives the Department of Education power to cut off from

03:07eligibility organizations that just don't have the same mission or policy perspective as the Trump

03:14administration does. So for instance, there's some concern that they would cut off entire, you know,

03:20states or cities led by Democrats if they aren't adequately cooperating with federal immigration

03:25enforcement. Just as an example.

03:28I was going to ask, does this effectively weaponize, potentially, because this is just proposed changes,

03:34these are not officially in effect, but does this potentially weaponize the public service loan

03:39forgiveness program for the Trump administration's political aims?

03:43That is exactly what critics of the proposed rules are suggesting it would do. It would give the federal

03:49government power to wield PSLF as a tool to force policy concessions from states, from cities, from

03:59nonprofit organizations, including academic institutions or hospitals. And, you know, it would

04:05punish borrowers who are stuck in the middle, you know. So for instance, you know, if the Trump administration

04:11wants to cut off the entire state government of California or New York from being eligible for PSLF,

04:18because, for instance, they're not cooperating with immigration enforcement to the level that the

04:22Trump administration would like, you know, every employee of the state, in that example, could be

04:29cut off from PSLF. Now you get into the history of public student loan forgiveness,

04:35and I'd love to bring some of that to our audience right now. How long has it existed?

04:41Has it enjoyed bipartisan support? And how often is the program changed by an administration?

04:48Yeah. So the program was created in 2007. It was signed into law. It was, you know, it was,

04:53it was created by Congress and signed into law by President George W. Bush. So it was a bipartisan

04:59program. It sort of, you know, didn't go through many changes for a long period of time in part,

05:05because it took a while for people to reach the 10 year threshold. Then we found out that there were

05:10some problems with the program, including counting people's payments or telling people about the rules,

05:15about how the program worked. So approval rates were pretty low. Under the Biden Harris administration,

05:20some new initiatives were put into place, some temporary waiver programs, new regulations designed

05:25to make it easier for people to navigate the program. And that resulted in a big jump in approval. So we

05:31went from just basically a few thousand people who had been approved as of 2020. By the end of 2024,

05:37we had more than a million borrowers who had been approved for PSOF.

05:41And these are borrowers who have potentially graduate degrees in law or medicine and have

05:47gone on to work for a nonprofit. Is that correct?

05:50Nonprofit or government. I mean, the program is designed, you know, with, with, you know,

05:56an intention to give people a pathway to working in fields that traditionally require advanced degrees,

06:03but don't pay anywhere nearly as much as what you might receive in the private sector.

06:07So a great example of this are prosecutors and public defenders who often work directly for state

06:13government. You know, they're, they're, they're the, the folks that operate our criminal justice

06:19system. You know, these types of attorneys often take out, you know, $200,000 or more in student debt

06:24to be able to get their law degree. But instead of making $250,000 a year working for big law as an

06:31associate, they instead are going to take a salary of say $60,000 a year working as a prosecutor or,

06:37or a, a defender. And the only way that they can make this work is through a program like public

06:42service loan forgiveness. Now, under the administration's proposed changes,

06:47what would happen to borrowers who are currently enrolled in public service loan forgiveness and

06:53are perhaps five or seven years into the repayment plans? They're looking forward to loan forgiveness

07:00in five to three years. Would these proposed changes just end that if their employer is deemed

07:07as engaging as in substantial illegal activity? It most certainly could. And in fact, borrowers under these

07:15proposed rules would have no recourse whatsoever to contest a decision that their employer no longer

07:23qualifies. And the Department of Education's position is, well, these folks can just find a different job.

07:28And of course, that is potentially harder than it might seem from the Department of Ed's statement

07:34on that. But it could absolutely cut people off from student loan forgiveness under PSLF. If there's any

07:40good news, it's that it wouldn't erase past progress toward loan forgiveness if the employer is deemed to be

07:46non-qualifying, but it would halt any future progress once that determination has been made.

07:51And then have you talked to any sources about what it could mean if these rules go into effect for

07:58people entering these nonprofit and government jobs in the future? Could we see an effective depression

08:05of or suppression of people working in these jobs? There is concern that this would have a chilling

08:11effect on public service work in general. If you can't know with confidence that the job that you are

08:18trying to get or applying for is going to result in you getting the benefit that you're being promised,

08:27why would people take the risk? Why would people jump into that field if it can just be taken away?

08:33That is the concern that some critics have raised, is that this will essentially have a broad chilling

08:38effect on employment and state government, local government, nonprofits, where we really need

08:43good people to be taking these roles. So what happens next? And are these proposed laws or changes

08:50rather within the boundary of the law? Because obviously there are a lot of regulations that

08:56control the federal student loan portfolio. Is what the Trump administration proposing here even legal?

09:03It's a great question that remains to be seen. There was a there's a process that the Department of

09:09Ed must go through to create new regulations. It's called negotiated rulemaking. And there were a

09:14series of rulemaking hearings that occurred earlier this year, and certainly at least one committee

09:20member argued that this is not legal. Basically, Congress passed a law to create PSLF. It said in the

09:28law that if you're a 501c3 nonprofit organization, it qualifies for PSLF. If you're a government, state,

09:34local, federal, county, tribal, state, local, federal, county, tribal, it qualifies for PSLF. There's no room

09:39for picking and choosing which of those employers qualify. Under the language of the statute, those

09:44employers are eligible for for PSLF. And critics argue that by, you know, allowing the Department of

09:54Ed to basically pick and choose which of those nonprofits, which of those governments actually

09:58qualify based on activities, it may violate the original statute that created PSLF.

10:04Some critics have gone even further and said that it could be, you know, some form of viewpoint

10:11discrimination if it gets to that point where it could, you know, potentially raise constitutional

10:15concerns as well. But like you said, these rules are not finalized. They're not in effect on what

10:20happened is the Department of Ed released these proposed regulations following these committee hearings.

10:28There's now a 30 day period open to public comment. And then after that, the Department of Ed will

10:34publish final rules probably sometime this fall. And the anticipated effective date when the rules

10:40would actually go into effect with the first 2026. Many observers do expect there to be legal challenges

10:46once the rules actually go into effect. So it's probably going to come down to a court to figure

10:51out whether this is legal or not. Which of course could create confusion for borrowers. What is your

10:57message for any borrower who is currently enrolled in this program who is watching and concerned about

11:03their future? Yeah, I mean, I think, you know, having some level of concern is warranted. I don't think

11:10it's time to panic. I don't think this is a reason not to pursue PSLF, which can really be a very

11:15beneficial program. But what I'm advising my clients and my readers to do is buckle up for

11:20some uncertainty and volatility over the course of the next couple of years, at least, because

11:25we don't know, you know, exactly what's going to happen here. Assuming these rules do go into effect

11:30on July 1st and there are legal challenges, we're still not going to have a clear answer,

11:35probably for a little while as things play out in the courts. So again, not a reason to panic,

11:41not a reason to pull away from public service work, but a reason to be vigilant and keep your

11:46ear to the ground about these changes. Keep your ear to the ground and read Adam Minsky on Forbes.com.

11:52Adam, thank you so much for joining us and breaking this down for us. We so appreciate your insight.

11:57Thanks for having me. I appreciate it.

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