PAST ACTION: PROPOSED PSLF CHANGES

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On August 18th, the U.S. Department of Education released a Notice of Proposed Rulemaking to change how the Public Service Loan Forgiveness (PSLF) program works. The proposed changes would severely limit which employers qualify, among other restrictions. 

The National Council of Nonprofits is urging nonprofits to resist these changes by submitting comments to the Department. The deadline to submit your comments was September 17, 2025.

Here’s what you need to know:

WHAT’S PROPOSED

Under the proposed rules:

• Employers engaging in activities deemed to have a “substantial illegal purpose” would no longer count as qualified employers under PSLF.

• Examples of what counts as “substantial illegal purpose” include aiding or abetting violations of immigration law, supporting terrorism (including funding), illegal discrimination, trafficking of children, and other serious offenses.

• The Department of Education (ED) would have the power to strip an employer’s eligibility based on a “preponderance of evidence,” without a full, adversarial process. Criteria might include frequency/severity of violations, or a court judgment or settlement.

• Employers would also be required to certify they are not engaging in disqualifying activities. If they are disqualified, they could potentially regain eligibility after 10 years or using a corrective action plan, subject to ED approval.

WHY THIS MATTERS

Public Service Loan Forgiveness was built to encourage and support public service, especially in nonprofit and government sectors. If employers suddenly become disqualified or are subject to vague standards, it threatens:

• The ability of talented people to commit to public-service careers (especially in nonprofits) without fear of losing the support of PSLF.

• The financial stability and staff recruitment of nonprofits, particularly those working in underserved communities.

• The predictability of the program: people plan based on current rules and promises. Abrupt or retroactive changes can undermine trust, retention, and the promise of PSLF.

WHAT ARE THE CONCERNS

The Council of Nonprofits raises several objections to these changes:

1. Conflict With Existing Law

   1. Current law specifically ensures that all 501(c)(3) charities are PSLF‑qualified employers. The proposed rule would overstep that statutory guarantee.

2. Risk of Political or Ideological Bias

   1. The proposal could allow future decisions about who qualifies to be influenced by political or ideological considerations (e.g. nonprofits working with immigrants, supporting racial equity, or serving marginalized communities) rather than strictly legal criteria. 

3. Harm to Nonprofits, Workers, and Communities

   1. Employees may lose the opportunity to work in public-service jobs if their employers are later disqualified.

   2. Nonprofits may struggle to recruit and retain staff. The consistency and predictability that many have relied on in PSLF would be undermined.

4. Due Process Concerns

   1. The standard (“preponderance of evidence”) favors a lower burden than many legal processes.

   2. ED may lack the capacity, expertise, or organizational structure to make these determinations fairly.

5. Existing Mechanisms Already Address Illegal Conduct

   1. There are legal and regulatory systems (IRS rules, criminal law, etc.) to deal with employers violating laws. This rule duplicates or expands those in ways that may be unnecessary. 

The MASSCreative Action Network is monitoring these proposals.

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