Updated: The U.S. Department of Education finalized this new regulation on Oct. 30 after making minor changes in response to public comments. View the final rule here.
Teachers and other school staff could lose out on thousands of dollars in student loan forgiveness if their districts engage in activities the Trump administration now considers illegal—including, potentially, certain supports for immigrants or transgender students in schools.
More than a million teachers, nurses, counselors, librarians, and other public service workers have had student debt forgiven by the Public Service Loan Forgiveness program, the largest such federal incentive. The program cancels qualifying debt for borrowers who made on-time payments for a decade as they worked for groups including school districts, community health centers, and some nonprofits.
On Monday, the Trump administration published proposed new rules for the loan forgiveness program, which would deny eligibility for employers who engage in activities with a “substantial illegal purpose.” Blacklisted employers would be barred from participating in the loan forgiveness plan for 10 years, or until the U.S. Secretary of Education approves a “corrective action plan.”
The Education Department estimated that, under the new regulations, it would gain more than $1.5 billion in new payments from borrowers whose employers lose eligibility. Federal data show the average teacher, for example, carries more than $55,000 in student loan debt.
Dozens of education groups and K-12 teachers who use the student loan forgiveness program have already written to voice concern over the proposed changes.
“Trump is not only hurting teachers and nurses who are just trying to do their jobs and live their lives, but also making it harder for them to help their students and communities,” Randi Weingarten, president of the American Federation of Teachers, said in an interview with Education Week. She said the changes would punish borrowers who work for organizations that don’t align with his ideological preferences.
“It’s no secret that the organizations on his so-called blacklist are often the ones committed to helping the people he fears the most—immigrants, the LGBTQ+ community, and other ethnic and racial minorities,” Weingarten said.
What counts as ‘illegal purpose’?
The proposed rules will be open for comment until Sept. 17, after which the Education Department must address the feedback as it prepares a final rule.
Essentially, the rules mirror restrictions outlined in President Donald Trump’s series of executive orders and related policymaking. Those efforts broadly seek to prohibit diversity, equity, and inclusion programs, restrict medical treatments and other supports for transgender individuals, and seek to deny services to undocumented immigrants or make deporting them easier.
The Education Department justified the proposed changes based on the “illegality doctrine,” a rarely used Internal Revenue Service protocol for gauging whether groups qualify for tax-exempt status. The doctrine has not been used in the context of student loan forgiveness before, and the rule changes would not be limited to employers who have lost tax-exempt status.
It spells out numerous “substantial illegal purposes” that participating employers must avoid, including violating immigration laws. In fact, the rules go beyond direct violations to cover an employer that “counsels, commands, induces, or procures” immigration violations.
“Using language like, ‘organizations that have an illegal purpose,’ that feels very clear, but I think what we have seen from the current administration is their interpretation of those words probably are not the average person’s interpretation,” said Ryan Fewins-Bliss, the executive director of the nonprofit Michigan College Access Network, which works to increase the share of college graduates in the state. He and other staff of the nonprofit have received loan forgiveness from PSLF.
In states that bar gender-affirming care for trans students, the regulation would prohibit participating employers from engaging in “chemical castration or mutilation,” which the department defines as the use of hormone blockers or other medicines to delay puberty, an intervention sometimes used for transgender children.
The proposed rules would also expand the definition of “trafficking” beyond a focus on sex trafficking to include moving LGBTQ+ students under age 19 to states that allow emancipation from parents.
And they would bar student loan forgiveness for employers that “aid and abet” patterns of illegal discrimination. The regulations identify that as violating the nation’s civil rights laws, but the Trump administration has interpreted such discrimination to include DEI efforts and programs in both K-12 and higher education.
Federal negotiators flagged free-speech concerns
The Education Department crafted the proposed rule through a complicated process of negotiated rulemaking, in which it gains feedback from a panel of representatives from higher education institutions, current participants in PSLF, and other stakeholders.
Although all but one of the participants eventually approved of the Education Department’s proposed language, they detailed major concerns about the regulation’s expansiveness.
For example, several commenters and negotiators warned that the proposed rules raised serious First Amendment concerns if employers, for example, were penalized for working with undocumented students, providing information to transgender students, or supporting protest activities against federal policies.
The Education Department clarified that the Education Secretary would not revoke an employer’s eligibility based on constitutionally protected speech, specifically highlighting an employer who “releases information in support of transgender rights but does not engage in the chemical or surgical castration or mutilation of a child.”
However, the department has not yet clarified what crosses the line between activities protected by the First Amendment and those that would be considered “aiding and abetting” illegal actions.
“No one is advocating that the executive director of the Ku Klux Klan gets their loans forgiven,” Fewins-Bliss said. “The argument is, how are you going to interpret [the proposed rules] against organizations that have had a legal purpose up until now and are operating to improve their community where they see a problem?”
The department’s initial notice, in April, that it planned to move forward with rulemaking has already brought comments from educators.
For example, schools across the country have grappled with fears about immigration raids near or in schools, after the Trump administration in January revoked protection for K-12 schools and related locations from immigration enforcement.
The changes to PSLF eligibility could put teachers serving immigrant students in a double bind, warned Cheryl Drowns, a secondary science teacher in Monona, Iowa, in public comments on the rule.
“Schools cannot deny admission or discriminate against students based on immigration status,” Drowns wrote, noting the landmark U.S. Supreme Court ruling on immigrant student education in Plyler v. Doe. “Teachers should not be penalized for schools following federal laws.”
How might the rules impact schools?
Schools and education organizations would be disproportionately affected by the new rules. According to a report released in January by the Education Department’s office of the chief economist, education accounts for 43% of employers participating in the Public Service Loan Forgiveness program, with K-12 schools alone accounting for 28% of borrowers.
Teachers and education watchers expressed concern that the new rules would add even more bureaucratic red tape to a program that has already garnered criticism for eligibility delays and confusion. If the proposed rules take effect July 1, 2026, employers would have to certify on borrowers’ applications that they did not participate in the forbidden activities.
“Should my employer be deemed ineligible, I would face significant financial repercussions and may be compelled to seek work in the for-profit sector,” wrote Robin Boyle, a secondary teacher in the Natomas Unified school district in Sacramento, Calif., in the public comments.
Boyle called the proposed new definitions “ambiguous ... that could be interpreted differently by current and future administrations, resulting in unnecessary uncertainty and confusion for employees and borrowers alike.”
The PSLF program has become an increasingly crucial recruiting and retention tool for districts coping with staffing shortages. While only 7,000 public service workers had their student loans wiped in the first 13 years of the program, it expanded exponentially during the Biden administration, with more than a million loans forgiven since 2021.
Both negotiators and members of the public voiced concern that the proposed changes to the program could have a “chilling effect” on the number of young people interested in going into education and other public service jobs.
“There is a shortage of qualified teachers in our country and it’s critical that we support the continued functionality of both [the program] and reasonable income-based repayment so that we can attract quality educators,” wrote Allison Meleedy, a middle school science teacher in Milton, Mass. The federal Public Service Loan Forgiveness and repayment programs, she said, were “driving factors in my decision to serve the public and teach our children.”
