The U.S. Department of Education announced the finalization of a rule that modifies the Public Service Loan Forgiveness Program (PSLF), excluding organizations involved in activities deemed “illegal” by the administration. The measure, which comes into force in July 2026, defines actions such as support for irregular immigration and assistance to transgender people as illegal, directly affecting public and NGO employees. Critics argue that the change serves to retaliate against political opponents, generating two lawsuits filed by Democratic states and advocacy groups.
The rule follows an executive order signed by Donald Trump in March 2025 that directed the review of eligibility for PSLF, created in 2007 to forgive federal loan debt after 10 years of qualifying payments. To date, more than 1 million beneficiaries have had debts canceled, totaling billions of dollars in relief. Now, the Secretary of Education decides based on a “preponderance of evidence” whether an employer qualifies, creating uncertainty for thousands of workers.
Education policy experts warn of the risk of discretionary abuse, especially in sensitive contexts such as LGBTQIA+ rights and immigration.
- Human rights defenders see a violation of the First Amendment by punishing ideologies.
- Analysts at the Cato Institute highlight scope for discrimination based on political alignment.
- Teachers union representatives predict impact on inclusive curricula in public schools.
Details of the new definition of illegal activities
The Department of Education specifies that the exclusion applies to organizations with a “substantial unlawful purpose,” including assisting violations of immigration laws and supporting gender transitions for minors. This categorization ranges from health clinics to legal aid agencies, potentially disqualifying entire employers if a specific unit is singled out.
The application occurs in a neutral manner, according to Undersecretary Nicholas Kent, who emphasizes the protection of public funds against subsidies for practices such as terrorism or child trafficking. Employers receive notification and opportunity to challenge, with the possibility of a corrective plan to regain eligibility.
However, the vagueness of the “preponderance of evidence” criterion raises concerns about subjectivity.
Lawsuits filed against the rule
Twenty-one Democratic states, led by attorneys general like Letitia James of New York, sued in U.S. District Court in Massachusetts. They claim the policy violates the Higher Education Act of 1965, which grants automatic eligibility to governments and 501(c)(3) nonprofits, and could affect teachers with inclusive curricula or lawyers.immigration cattle.
A second lawsuit, filed by Democracy Forward and Protect Borrowers, includes cities like Chicago and Boston, unions like the American Federation of Teachers and the National Council of Nonprofits. The authors argue that the rule turns the PSLF into a political tool, going against Congress and threatening the recruitment of public servants.
Both actions seek to immediately block the rule, with hearings scheduled for the coming months.
The coalition of plaintiffs represents millions of potential beneficiaries, including nurses and police officers in diverse contexts.
Historical context of PSLF and expected impacts
PSLF emerged in 2007, under George W. Bush, to encourage careers in public service, with more than 9 million people estimated to be eligible by 2022. Under Biden, facilities increased approvals, but the Trump administration rolled back access to income plans, aligning with Project 2025 to reduce relief options.
The current change could exclude up to a quarter of LGBTQIA+ workers in skilled sectors, according to the Williams Institute, affecting recruitment in NGOs and local governments. Hospitals with transgender care wards, for example, are at risk of complete loss of eligibility.
Experts such as Alex Lundrigan, from Young Invincibles, classify the measure as illegal and harmful, predicting judicial reviews that test executive limits.
Trump administration strategy on education
Since JaneStarting in 2025, the administration cut funding for districts that do not adopt policies restrictive to transgender students, such as bathroom use and sports. Arrests of pro-Palestinian academics and accelerated deportations illustrate the use of federal agencies to align institutions with political agendas.
The Department of Education, under Linda McMahon, prioritizes reforms that avoid “subsidizing irreversible harm”, citing trans procedures as an example. This approach integrates larger efforts to eliminate the department, as conservative proposals do.
Kent reinforces neutrality, but opponents see selectivity in examples cited, such as immigration and gender.
Voices of experts and advocates
Neil McCluskey, from the Center for Educational Freedom at the Cato Institute, warns of the wide spectrum of interpretations that allow ideological targeting. He questions the standard of evidence, which does not require judicial convictions for disqualification.
Skye Perryman of Democracy Forward describes the rule as political retaliation with no place in a democracy, representing coalitions defending public rights.
Persis Yu, from Protect Borrowers, says the measure silences dissent and dismantles accountability institutions.
These perspectives highlight the balance between tax reform and constitutional rights.
