U.S. Department of Education Proposes Rule to Prevent Illicit Employers from Receiving PSLF Benefits

Strategic Insights -

The U.S. Department of Education has issued a Notice of Proposed Rulemaking (NPRM) that aims to prevent Public Service Loan Forgiveness (PSLF) benefits from being improperly provided to borrowers working for employers engaged in activities with a substantial illegal purpose. The proposed rules would exclude organizations that engage in activities like supporting terrorism, aiding or abetting discrimination or violations of immigration laws, or child abuse, from qualifying as PSLF employers. The move follows President Trump's Restoring Public Service Loan Forgiveness Executive Order in March, which directed the Department to propose revisions to the PSLF program to exclude illicit employers.

Key Takeaways:

  • The proposed rules would halter PSLF benefits to employees of organizations with a "substantial illegal purpose," such as supporting terrorism or aiding or abetting discrimination.
  • The definition of "public service" would be refined to exclude organizations that engage in activities with a substantial illegal purpose.
  • The Department gathered public feedback through two public hearings in May and a negotiated rulemaking committee last month.
  • The proposed rules aim to ensure employers do not benefit while breaking the law, as stated by Under Secretary of Education Nicholas Kent.
  • The comment period for the proposed rules closes on September 17, 2025, with comments to be submitted through the Federal eRulemaking Portal at www.regulations.gov.
  • Section 492 of the Higher Education Act requires the Secretary of Education to solicit public involvement in the development of proposed regulations before publishing a Notice of Proposed Rulemaking.

Statistics:

  • The Department will not accept comments submitted by fax or by email.
  • The Department must receive comments on or before September 17, 2025.
  • The negotiated rulemaking session concluded after three days of negotiations, with an overwhelming majority of the committee voting in support of refining the PSLF employer definition.

Sources:

  • U.S. Department of Education: Notice of Proposed Rulemaking (NPRM)
  • "Restoring Public Service Loan Forgiveness Executive Order" by President Trump
  • Higher Education Act, Section 492