The Trump administration released a final rule on Thursday that restricted who could participate in a student loan forgiveness program for public servants, making it easier to push out employers who engage in activities that it deems to have “a substantial illegal purpose.”
Those employers could include organizations that work with undocumented immigrants, for example, or provide gender-affirming care to children under the age of 19, among others.
The Trump administration argues that taxpayer funds should not subsidize illegal activity, but critics of the new rule say it gives the government broad tools to politicize the program and target groups that do not align with its values.
The rule fulfills an executive order that President Trump issued in March. On the new rule, Nicholas Kent, under secretary of the Education Department, said in a statement: “The Trump administration is refocusing the P.S.L.F. program to ensure federal benefits go to our nation’s teachers, first responders and civil servants who tirelessly serve their communities.”
The program known as Public Service Loan Forgiveness, or P.S.L.F., was created by Congress in 2007 and is open to government and nonprofit employees like schoolteachers, public defenders and librarians. After making 120 qualifying payments in an income-driven repayment plan — which requires at least 10 years of service in qualifying jobs — any remaining balance is wiped out.
Many public servants have staked their financial futures on the program, and being disqualified could potentially upend their finances. More than one million people have received tens of billions of dollars in loan forgiveness under the program.
The new rule, which takes effect on July 1, will be applied only “prospectively,” according to the Education Department. In other words, borrowers who have been making qualifying payments under the program would not lose payment credits if their employer was deemed ineligible next summer. (The 185-page final rule will be published in the Federal Register on Friday.)
“It’s very important to let borrowers know not to panic nor make any snap decisions on their loan strategy based on this rule,” said Betsy Mayotte, president of the Institute of Student Loan Advisors, which provides advice to borrowers. “First, the rule itself could very well be struck down by the courts. Second, even if it isn’t, the rule is prospective only.”
An array of Democratic lawmakers, more than 250 consumer and labor groups, and a coalition of nearly two dozen attorneys general have opposed the rule. And two advocacy groups, Protect Borrowers and Democracy Now, have pledged to file suit challenging it.
“This effort has always been about weaponizing debt relief to target and punish public service organizations and workers with whom the Trump-Vance administration disagrees,” said Winston Berkman-Breen, the legal director at Protect Borrowers.
The Education Department said in a fact sheet that “the rule does not change the underlying law; it establishes consequences for breaking the law.”
It does, however, amend the definition of “qualifying employer” to exclude those who participate in activities that it deems to have substantial illegal purpose. That includes “aiding and abetting violations of federal immigration laws, supporting terrorism or engaging in violence for the purpose of obstructing or influencing federal government policy,” for example. Among other things, it also includes “engaging in a pattern of aiding and abetting illegal discrimination, and engaging in a pattern of violating state laws.”
Employers who find themselves under review will be notified and given an opportunity to dispute the department’s findings, and they will keep their status as a qualifying employer until a final determination is made by Education Secretary Linda McMahon. Borrowers themselves will not be able to appeal their employers’ status — and they continue to receive payment credits until a final determination is made.
If an organization is pushed out of the program, or even if they are under review, the department will notify both the employer and impacted borrowers.
Tara Siegel Bernard writes about personal finance for The Times, from saving for college to paying for retirement and everything in between.
The post Trump Rule Could Bar Some Public Servants From Student Loan Forgiveness appeared first on New York Times.
