Public Service Loan Forgiveness (PSLF) Program
Updated November 2025
PSLF Final Rule Response from TNPA
The Department of Education released this fact sheet and the final rule that amends the regulations for the Public Service Loan Forgiveness (PSLF) program. This new rule, as The Nonprofit Alliance (TNPA) and many in the nonprofit community warned, will ultimately limit nonprofit eligibility for the PSLF program, will make challenges to eligibility decisions more difficult, and will continue unwarranted scrutiny of the nonprofit sector. The regulations will come into effect on July 1, 2026.
As background, The Nonprofit Alliance (TNPA) previously submitted this comment during the open comment period, which ended in mid-September. As we laid out at the time, the proposed rulemaking could curtail nonprofit employment in the future, with far-reaching negative consequences for communities nationwide that depend on nonprofit services for education, disaster response, healthcare, social services, and cultural enrichment. One particular concern in the proposed amendments was language included around illegal discrimination, which raised significant questions of how that category may be defined and implemented. Secondly, some of the additional administrative responsibilities described could make challenges more onerous for nonprofit organizations regarding decisions made on disqualifications for illegal discrimination or other categories.
Unfortunately, as the final rule describes, the proposed rule essentially remains the same despite a few small clarifications. The review process did not choose to make what many of the submitted public comments requested regarding language changes and omissions.
Following the release of the final rule, over 12 state attorneys general sued the Department of Education over the new restrictions for eligibility for PSLF and, separately, a coalition of nonprofits, unions, and cities filed this lawsuit. The Nonprofit Alliance will continue to elevate our concerns around the impact on the nonprofit sector of this change and the importance of the Public Service Loan Forgiveness Program (PSLF).
Public Service Loan Forgiveness (PSLF) Public Comment
The Nonprofit Alliance (TNPA) continues to track potential restrictions for nonprofit employees to The Public Service Loan Forgiveness (PSLF) program.
The Nonprofit Alliance submitted a public comment in September for proposed changes to PSLF that were made public in August, raising the importance of the program itself and flagging concerns around possible changes, including around discrimination definition changes and making challenges to PSLF eligibility decisions more difficult.
Other Congressional changes to the PSLF from legislation this summer will limit other options for borrowers, including the amount that an individual may borrow. Combined with proposed rulemaking changes, we remain concerned that these steps will chip away at access for nonprofits with the PSLF program and impact nonprofit hiring and staff retention.
Update (As of 8/12/25): The passage of the One Big Beautiful Bill, signed into law by President Trump on July 4, 2025, included amending the PSLF to allow for payments in the Repayment Assistance Plan (RAP) to count towards their loan forgiveness. The Repayment Assistance plan, an income-driven plan, is new and will consolidate repayment options for new repayment loans and will come into effect no later than July 1, 2026. This will eliminate existing repayment options by July 1, 2028. The impact of borrowers on the Repayment Assistance Plan remains to be seen but includes possible increases in monthly payments as compared to current repayment programs. More broadly, the bill also limits the amount of federal loans that individuals may borrow.
What is the issue?
Congress established the Public Service Loan Forgiveness (PSLF) Program in 2007. Under this program, if the individual with the loan has worked a minimum of 10 years of full-time work (defined as a minimum of 30 hours per week) for a designated 501(c)(3) nonprofit organization or government entity (state, local, federal, or tribal) and makes all student loan payments for 120 months (10 years), then all remaining student loan debt is forgiven.
Threats to the PSLF Program
On June 24, 2025, the U.S. Department of Education put forward draft regulations to remove some 501(c)(3) employers from PSLF eligibility. This comes in response to the March 7 executive action calling on the Secretary of Education to limit eligibility for organizations the Administration determines are engaged in “illegal activities,” listed as:
- “Aiding and abetting” violations in immigration law. Immigration and resettlement-related organization could be at risk.
- “Child abuse,” which the administration specifically defines as providing or supporting gender-affirming healthcare for transgender youth, potentially impacting LGBTQ+ organizations.
- “Engaging in a pattern of aiding and abetting illegal discrimination,” which could implicate civil rights organizations and nonprofits supporting DEI initiatives.
The executive action provides enormous latitude to the administration to determine which organizations are eligible, and which are not. Companion bills in the Senate and House offer further backstop should executive branch efforts fail. Should provisions excluding certain 501(c)(3) from PSLF eligibility pass, litigation is likely.
The Nonprofit Alliance submitted comments prior to the rulemaking, here.
Why do nonprofits care?
This program offers an important benefit for recruiting staff into the nonprofit sector, competing with higher salaries offered in the private sector. Under PSLF, a total of $78 billion of loans have been forgiven, aiding 1,069,000 borrowers with an average loan balance of $73,000. Beyond the direct impact of lost PSLF eligibility, labeling specific nonprofit services “illegal” because they are inconsistent with the current administration’s policy priorities is a dangerous slippery slope that will have widespread effects in other regulatory areas under the current and future White House leadership.
Another option
Separate from PSLF, employers can now offer a pre-tax paycheck withholding applied toward a student loan, up to $5,250 per year. This benefit, alongside offerings like a 401(k) or 403(b) plan, allows employees to reduce short-term tax liability with long-term financial security benefits.
Additional Resources…
2025 PSLF Reconciliation Sign On Letter
TNPA is in partnership with PSLF.us
Access Employer Resources
Article: Work at a school or nonprofit? You could erase student loans | AP News
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