Public employees such as teachers, nurses, and social workers may lose eligibility for student loan forgiveness if their workplaces are accused of engaging in activities deemed “illegal,” under a new proposal from the Trump administration.

As per a report by The Times of India, the draft regulation, released on Friday, August 15, empowers the education secretary to determine whether a nonprofit or government entity can participate in the Public Service Loan Forgiveness (PSLF) program. Activities flagged as grounds for exclusion include providing gender-affirming care, supporting immigrants, or aiding groups with alleged ties to terrorism.

Background on PSLF

Established in 2007, the PSLF program cancels federal student debt for government and nonprofit employees after ten years of qualifying payments.

The Education Department estimates that fewer than 10 organisations annually would likely face disqualification, and emphasised that the majority of borrowers would remain unaffected.

Impact on workers and organisations

If the rule is finalised, it will take effect in July 2026. Employees at excluded organisations would see their loan payments no longer count toward forgiveness, forcing them to switch employers to stay eligible.

The department acknowledged that schools, universities, hospitals, social service providers, and legal aid groups could be among the most affected.

In 27 states where gender-affirming care is banned, organisations offering such services may be disqualified outright, added TOI.