Trump Could Soon Strip Student Loan Forgiveness From Millions of Borrowers

The Public Service Loan Forgiveness Program was created 20 years ago with bipartisan support, originally designed to forgive any remaining balance on the student loans of borrowers who have made 120 on-time monthly payments while being employed in the public sector. This program offered substantial relief for employees of nonprofit organizations, alongside all forms of government including city, local, state, tribal, and federal government.

But access to the program may soon be stripped away from millions of Americans.

In March, the Trump Administration began its attempt to dismantle the Department of Education when they fired nearly half its staff, which has led to significant delays in Income-Driven Repayment applications. The latest target in the administration’s attempt to gut the department is the Public Service Loan Forgiveness Program.

On August 18, the department published its preliminary rule stating its proposed changes to the Public Service Loan Forgiveness Program, a result of the most recent Negotiated Rulemaking—or Neg Reg—session. Neg Reg is a consensus-based process that the federal government undertakes to modify regulations governing a federal department or office.

These new changes aim to deem organizations and governments as “ineligible employers” if they are not aligned with the Trump administration’s agenda. Countless employers would be labeled ineligible PSLF employers with no appeals process, leaving millions of borrowers to bear an avoidable financial burden.

According to the published preliminary rule, “in cases where an employer is deemed to have engaged in activities that breach federal or state law or established public policy, affected borrowers would no longer receive credit toward loan forgiveness for months worked after the effective date of ineligibility.”

Any organization or government that provides gender-affirming care or offers legal support to immigrants who do not have legal status, for example, could be ineligible employers under PSLF, and their employees will stop accruing those credits. This political tantrum threatens to penalize organizations—as well as state and local governments—that serve and protect these marginalized groups.

These dangerous regulatory changes will lead to politically targeted punishments, with entire state and city governments made ineligible for PSLF. California, for example, is a sanctuary state and protects all residents including immigrants and LGBTQIA+ community members. The new cost of being a sanctuary state would make California an “ineligible employer” and would impact all state workers—from legislative staff to the State Parks Department.

To further put this into perspective, organizations must have an Employer Identification Number through the Internal Revenue Service in order to hire employees and for tax purposes, and the rule would make certain EINs ineligible employers for PSLF. For example, if you work for a hospital that provides gender-affirming care, the EIN would be marked as ineligible for PSLF for all employees—regardless of whether you work as a healthcare professional, administrative assistant, part of a cleaning crew, etc. Many organizations have one EIN for multiple organizations housed under them, and if one organization is conducting activities that would deem them ineligible, the other organizations would be too.

Cities like New York, Chicago, Los Angeles, and Denver have already faced lawsuits for their sanctuary city status from the Justice Department, and this Neg Reg process is part of a series of political attacks on these Democratic-run cities, along with education access as a whole.