On October 31, 2025, the U.S. Department of Education issued its final rule amending the Public Service Loan Forgiveness (PSLF) regulations. The final rule amends the definition of a “qualifying employer” to exclude employers that participate in illegal activities such that they have a substantial illegal purpose. The rule defines these illegal activities to include, “aiding and abetting violations of Federal immigration laws, supporting terrorism or engaging in violence for the purpose of obstructing or influencing Federal Government policy, engaging in the chemical and surgical castration or mutilation of children in violation of Federal or State law, engaging in the trafficking of children to States for purposes of emancipation from their lawful parents in violation of Federal or State law, engaging in a pattern of aiding and abetting illegal discrimination, and engaging in a pattern of violating State laws.”
Under this new rule, the Secretary will determine if an employer has engaged in illegal activities such that the organization has a substantial illegal purpose by considering the materiality of any illegal activities or actions.
The final rule outlines specific evidence that the Secretary may find is conclusive when deciding, and an employer’s opportunity to respond and rebut the Department’s finding. Qualifying employers that undergo review because they may have a substantial illegal purpose will maintain qualifying employer status until a final determination is made by the Secretary. An employer that loses eligibility can regain PSLF status either after ten years from the Secretary’s determination or sooner if the Secretary approves a corrective action plan. Borrowers do not have a right to appeal a determination against an employer.
This final rule will be effective on July 1, 2026.