Forgiveness and PSLF · guide
The PSLF qualifying employer rule of July 2026
From July 1, 2026, an employer stops being a qualifying employer for Public Service Loan Forgiveness if the Department of Education determines that it engages in activities with a substantial illegal purpose, as defined in a final rule published on October 31, 2025. The definition lists six categories: aiding or abetting violations of federal immigration law; supporting terrorism, including through cartels designated as foreign terrorist organizations or violence to obstruct federal policy; certain medical procedures on children in violation of federal or state law; trafficking children across state lines to emancipate them from their parents in violation of law; a pattern of aiding and abetting illegal discrimination; and a pattern of violating specific state laws, such as trespassing or obstruction of highways, established by final court judgments. The Department decides by a preponderance of the evidence, after notice and a chance to respond. A determination affects only later months: borrowers keep full credit for work performed before it. Government agencies, schools, hospitals and charities that engage in none of these activities are unaffected.
If your employer lost PSLF status
Payments that keep their credit
76
| Months after the determination that count | 0 |
| Payments still needed with a new qualifying employer | 44 |
| Months that would be lost by staying | 12 |
Assumes each month before the determination was otherwise qualifying.
A regulation published on October 31, 2025 changed which employers count for Public Service Loan Forgiveness. Here is the text, the process and the effect on borrowers.
Checked by Radif Partners · Editorial policy · How we calculate
Where the rule comes from
Executive Order 14235 of March 7, 2025, titled Restoring Public Service Loan Forgiveness, directed the Secretary of Education to propose revisions excluding organizations engaged in activities with a substantial illegal purpose. The Department held public hearings in April and May 2025, convened a negotiated rulemaking committee from June 30 to July 2, 2025, published a proposed rule on August 18, 2025, received nearly 14,000 comments and issued the final rule on October 31, 2025 (90 FR 48966). Under the Higher Education Act's master calendar, a rule published by November 1 takes effect the following July 1, which is why the date is July 1, 2026 (Department of Education, October 30, 2025).
The six categories, as written
| Category in 34 CFR 685.219(b)(30) | Key terms defined in the rule |
|---|---|
| Aiding or abetting violations of 8 U.S.C. 1325 or other federal immigration laws | Aiding or abetting; other federal immigration laws |
| Supporting terrorism, including facilitating funding or operations of cartels designated as Foreign Terrorist Organizations, or violence to obstruct or influence federal policy | Terrorism (18 U.S.C. 2331); violence for that purpose (18 U.S.C. 1501 et seq., crimes of violence under 18 U.S.C. 16) |
| Chemical and surgical castration or mutilation of children in violation of federal or state law | Definitions of the procedures and of child |
| Trafficking of children to another state for emancipation from their lawful parents in violation of federal or state law | Trafficking |
| A pattern of aiding and abetting illegal discrimination | Illegal discrimination |
| A pattern of violating state laws | Final, non-default state court judgments for trespassing, disorderly conduct, public nuisance, vandalism or obstruction of highways |
How a determination is made
The rule adds a process. The Department starts it in two situations: when an employer fails to certify on a borrower's PSLF form that it did not engage in activities with a substantial illegal purpose, or when the Department otherwise finds such activity under the rule's standard. It then decides by a preponderance of the evidence, after giving the employer notice and an opportunity to respond, and considering materiality. The rule also lists certain facts the Department will treat as conclusive evidence, such as some final judgments. Organizations that share an identification number can be treated as separate entities when they operate separately, so one affiliate's conduct need not decide another's status.
What it means for a borrower
For most public servants, nothing changes: the rule targets specific conduct, not sectors. Teachers, nurses, social workers, government employees and staff of nonprofits that engage in none of the listed activities keep earning credit as before. For a borrower whose employer is found ineligible, credit stops for months after the determination; earlier months are kept. The borrower can keep counting by moving to another qualifying employer, and the months already earned remain on the record. The regulation also bars individual borrowers from asking for reconsideration of the employer determination, so the practical response is to plan a move if a notice arrives.
What the rule does not change
The rule does not change the list of employer types that qualify: governments, 501(c)(3) organizations and other nonprofits providing qualifying public services remain eligible unless a determination is made against a specific employer. It does not change the 120-payment requirement, the full-time test of 30 hours a week, the qualifying plans or the tax-free treatment of PSLF forgiveness. It does not reach back before July 1, 2026: the activities that can lead to a determination are those on or after that date.
Timing and the 120 payments
Because qualifying payments need not be consecutive, an interruption costs time rather than progress. A borrower with 70 payments who works six more months for an employer before a determination, then moves to a new qualifying employer, keeps 76 and needs 44 more. Staying at the ineligible employer would add months that do not count. The PSLF calculator projects the forgiveness date and amount from any count, and the PSLF rules page covers the other conditions, which this rule does not change: full-time work, Direct Loans and a qualifying plan, now including RAP.
The Department's stated reasons
In its announcement, the Department said the change restores PSLF to its intended purpose of benefiting Americans working in public service, and that eligibility standards for qualifying employers had not been adequately monitored. It presented the rule as refocusing the program on teachers, first responders and civil servants. Critics raised objections during the comment period, which the final rule summarizes and answers. This page reports the rule's text and the Department's explanation as published, without taking a position; what matters for a borrower is how the definitions and the process apply to their own employer.
If your employer receives a notice
A notice to your employer, or one sent to you as a borrower, starts a period in which the outcome is not yet known. Three practical steps protect your count. First, certify your employment for every month up to now, so that the record of qualifying months before any determination is complete and documented. Second, keep your own copies of pay records and certifications. Third, if the Department makes a determination, note its effective date: months after it will not count at that employer, so a move to another qualifying employer restarts the count from your existing total. Because payments under RAP or IBR keep counting toward those plans' own forgiveness regardless of employer, staying on an income-driven plan during the transition is also sensible.
What employers must do
Employers sign the employment certification on the PSLF form, and the form now includes a certification that the organization does not engage in activities with a substantial illegal purpose. An employer that cannot sign it triggers the Department's process. An employer found ineligible can regain status after ten years or sooner through a corrective action plan approved by the Department, after which the Department updates its list within 30 days.
Litigation and changes
Rules of this kind are sometimes challenged in court, and outcomes can change how or whether they apply. This page describes the rule as published and effective on July 1, 2026; it does not report on lawsuits, because none were among the official documents read for this site. If a court order or a new rule changes the definitions or the process, the page will be updated with the citation. The current regulation is at 34 CFR 685.219.