July 2026
Public Service Loan Forgiveness (PSLF) is a federal program that encourages college graduates to work for government agencies or nonprofit organizations by forgiving the remaining balance on their federal student loans after ten years of work in the public sector and consistent loan repayment during that ten-year period. The Trump administration proposed changes to this program in 2025 that would have limited eligible nonprofit organizations to only those aligned with its values.
Changes to eligibility
On March 7, 2025, President Trump issued Executive Order 14235, Restoring Public Service Loan Forgiveness, which directed the Secretary of Education to propose revisions to the PSLF program and ensure the definition of public service excluded certain organizations that are engaged in activities not in line with the administration’s priorities. In response, the Department of Education (DOE) issued a final rule on October 30, 2025, amending the definition of a “qualifying employer” under the PSLF program to exclude organizations engaged in activities with a “substantial illegal purpose.” These activities include aiding immigrants, treating minors’ gender dysphoria, advancing alleged illegal discrimination, and protest-related conduct, all activities at odds with the Trump administration’s political agenda.
Rule blocked by federal courts – eligible PSLF participants can work for nonprofits that align with their personal and professional goals and priorities without restriction
In response, state attorneys general, municipal governments, nonprofit organizations, and others came together and filed lawsuits in two federal District Courts to block the regulation. On June 30, a day before the rule was to take effect, U.S. District Court judges in Massachusetts and Washington, D.C. vacated the new rule, prohibiting its implementation nationwide and securing the right of PSLF program participants to work for 501(c)(3) organizations of their choice.
The courts held that the proposed rule exceeded the DOE’s authority under the Higher Education Act because Congress expressly provides eligibility under PSLF for borrowers who are employed by qualifying organizations, which include all Section 501(c)(3) organizations, and that the Secretary of Education could not “pick and choose” among these organizations to determine which may qualify. The courts also found that the rule is “arbitrary and capricious” in violation of the federal Administrative Procedure Act, and that it violates the First Amendment by conditioning PSLF eligibility on an organization’s speech, advocacy, or viewpoint.
This was well-received news for graduates with federal student loan debt who work, or wish to work, for nonprofit organizations with missions and programs that are not aligned with the Trump administration’s priorities. As Diane Yentel, President & CEO of the National Council of Nonprofits, stated in their press release after the Court’s decisions were released, “[t]his decision is a win for the communities that depend on local nonprofits and for the workers who serve them. By protecting a proven, bipartisan program, we’re ensuring that dedicated nonprofit employees can keep the benefits they’ve earned and continue doing the work that matters.”
A win for the nonprofit workforce
Nonprofit employers: be sure to list this recruiting benefit in your job posts if your organization is a 501(c)(3)! It’s a competitive job market out there, and nonprofit employers should be sure to let candidates know of this job perk. For more about the PSLF program, and how to determine if your organization is eligible, see the Department of Education Federal Student Aid website. For more resources to share with your employees, see the National Council of Nonprofits’ Public Service Loan Forgiveness page.