William D. Ford Federal Direct Loan (Direct Loan) Program

The final regulations--

* Amend Sec. 685.219(b) to modify the existing structure of the subsection into the regulatory paragraph structure.

* Amend Sec. 685.219(b) to add definitions for: aiding or abetting, chemical castration or mutilation, child or children, foreign terrorist organizations, illegal discrimination, other Federal Immigration laws, substantial illegal purpose, surgical castration or mutilation, terrorism, trafficking, violating State law, and violence for the purpose of obstructing or influencing Federal Government policy.

* Amend Sec. 685.219(c) to establish that on, or after, July 1, 2026, no payment made by a borrower shall be credited as a qualifying payment for PSLF for any month that a qualifying employer is no longer eligible as a qualifying employer for the PSLF program. Borrowers will receive full credit for work performed until the effective date of the Secretary's determination that an employer engaged in illegal activities such that it has a substantial illegal purpose under the rule.

* Amend Sec. 685.219(e) to require the Secretary to notify borrowers of a qualifying employer's status if the qualifying employer is at risk of becoming or becomes ineligible to participate in the PSLF program.

* Amend Sec. 685.219(g) to clarify that a borrower may not request reconsideration of a determination by the Secretary that resulted in the employer losing status as a qualifying employer because the employer has a substantial illegal purpose.

* Add Sec. 685.219(h) to establish that the Secretary determines by a preponderance of the evidence, and after notice and opportunity to respond, and consideration of materiality, that a qualifying employer has engaged in activities enumerated in paragraph (b)(30) on or after July 1, 2026, such that the employer has a substantial illegal purpose. Also, the Secretary will presume certain actions are conclusive evidence that the employer engaged in activities such that it has a substantial illegal purpose.

* Add Sec. 685.219(i) to establish that the Secretary will initiate the process for determining whether a qualifying employer engaged in activities such that it has a substantial illegal purpose when (1) the Secretary receives an application in which the employer fails to certify that it did not participate in activities that have a substantial illegal purpose, or (2) the Secretary otherwise determines that the qualifying employer engaged in such activities under the standard set forth in Sec. 685.219(h). The Secretary made a minor technical change from the NPRM to remove an extraneous word “which” from (i)(1)(ii). Further, paragraph (i)(2) clarifies that the Secretary may consider organizations that share the same identification number or other unique identifier to be separate entities if the organization is operating separately and distinctly from another entity with the same identification number (i.e., for the purpose of determining whether an employer sharing such identifier is eligible).

* Add Sec. 685.219(j) to establish that an employer that loses PSLF eligibility and desires to regain eligibility could regain qualifying employer status either (1) 10 years from the date the Secretary makes

a determination under the process in subsection (i), or (2) after the Secretary approves a corrective action plan.

* Add Sec. 685.219(k) to require that, if an employer regains eligibility to participate in the PSLF program, the Secretary updates, within 30 days, the qualifying employer list.

The PSLF program was established by the College Cost Reduction and Access Act of 2007 (CCRAA), Public Law 110-84, 121 Stat. 84. In particular, the CCRAA amended section 455(m) of the Higher Education Act of 1965, as amended (HEA), to allow for cancellation of remaining loan balances for eligible Direct Loan borrowers after they made 120 monthly payments under a qualifying repayment plan while working in a qualifying public service.

Following the enactment of the CCRAA, the Department promulgated PSLF regulations at 34 CFR 685.219, which became effective on July 1, 2009. See Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program, 73 FR 63232 (Oct. 23, 2008).

Since its original promulgation, 34 CFR 685.219 has been amended seven times. See 74 FR 55972 (Oct. 29, 2009); 77 FR 76414 (Dec. 28, 2012); 80 FR 67204 (Oct. 30, 2015); 85 FR 49798 (Aug. 14, 2020); 87 FR 65904 (Nov. 1, 2022); 88 FR 43064 (July 6, 2023); 88 FR 43820 (July 10, 2023).

Of these amendments, two amendments promulgated in 2020 and 2022, respectively, have substantively changed the criteria for qualifying employment for the purposes of participation in PSLF. In 2020, the definition of “public service organization” was substantively changed to allow employees of organizations engaged in religious activities (regardless of whether the borrower's duties included religious instruction, worship services, or any form of proselytizing) to be eligible for PSLF. This change was made in response to the United States Supreme Court decision in Trinity Lutheran Church of Columbia, Inc. v. Comer, 582 U.S. 449 (2017), and the United States Attorney General's October 7, 2017, Memorandum on Federal Law Protections for Religious Liberty, https://www.justice.gov/archives/opa/press-release/file/1001886/dl. This memorandum was written pursuant to Executive Order 13798 on Promoting Free Speech and Religious Liberty (May 4, 2017) and was intended to ensure that faith-based entities are not discriminated against due to their religious beliefs and that borrowers choosing to work for such entities (which met the definition of public service organization) could gain the same benefits afforded to borrowers working for non-faith-based entities. In 2022, the Department changed the term “public service organization” to the term “qualifying employer” under 34 CFR 685.219 and substantively changed the underlying way the definition functions. In these regulations, subsection (v)(A) of the definition of qualifying employer referenced another term: “non-governmental public service.” Previous iterations of 34 CFR 685.219 provided a list of public services that, if provided by a private organization, allowed it to qualify as a “public service organization,” but did not offer any definition for the enumerated public services (except for certain public health roles, which relied on definitions provided by the Bureau of Labor Statistics). This list aligned closely with section 455(m)(3)(B) of the HEA, which defines “public service job.” Although the 2022 rule incorporated the bulk of previous version's list of public services into the definition of “non-governmental public service,” it also provided specific definitions for each public service incorporated into that definition. Furthermore, the 2022 rule clarified that private organizations providing a non-governmental public service had to be nonprofit organizations to be considered a qualifying employer for the purposes of PSLF, substantially limiting employer eligibility.

The Department, in this final rule, establishes that to be considered a qualifying employer for purposes of the PSLF program, an organization must not engage in illegal activity such that it has a substantial illegal purpose. Organizations that break the law such that they have a substantial illegal purpose are actively harming the public good. See Mysteryboy Inc. v. Comm'r, 99 T.C.M. (CCH) 1057 (T.C. 2010). This rule prevents Federal funds from subsidizing harmful illegal activities through a program designed to reward public service.

Below, we address the Secretary's broad authority to engage in rulemaking on this topic and provide a brief discussion of the relevant statutory authority regarding what type of organization constitutes a qualifying employer for the purposes of PSLF, the implementation of that authority, and relevant changes to 34 CFR 685.219 since its original promulgation. Additionally, we discuss how the illegality doctrine utilized by the Internal Revenue Service (IRS) serves as a basis for the Department to promulgate regulations to exclude organizations that have engaged in certain illegal activities from the definition of qualifying employers.

The negotiated rulemaking committee that convened June 30 through July 2, 2025, considered draft regulatory text and did not reach consensus because one negotiator disagreed with the draft regulatory language.

On August 18, 2025, the Secretary published a notice of proposed rulemaking (NPRM). The NPRM included the Department's proposed regulations, and these final regulations reflect and respond to the public comments received on the regulatory proposals in the NPRM. These final regulations also contain changes from the NPRM, which are fully explained in the Analysis of Public Comments and Changes section of this document, where applicable.

Cost and Benefits: As further detailed in the Regulatory Impact Analysis (RIA), the final regulations will have meaningful implications for borrowers, taxpayers, and the Department. The regulatory changes outlined in this final rule are designed to strengthen the integrity of the PSLF program by ensuring that only borrowers employed by organizations engaged in lawful activities and legitimate public service remain eligible for loan forgiveness. By excluding employers engaged in activities such that they have a substantial illegal purpose, the rule aims to better align PSLF eligibility with the program's statutory intent: to encourage Americans to pursue public service careers that improve their communities. Furthermore, the rule will ensure that the Department is not indirectly subsidizing employers engaged in activities that have a substantial illegal purpose that harm fellow Americans.

For borrowers, the final rule will remove PSLF eligibility whenever they are employed by organizations that do not qualify under the revised criteria. In cases where an employer is deemed to have engaged in activities that breach Federal or State law, affected borrowers will no longer receive credit toward loan forgiveness for the months worked after the determination date of ineligibility as made by the Secretary. However, borrowers will receive full credit for work performed until the effective date of the Secretary's determination that they are no longer a qualifying employer for the purposes of the PSLF program. Although this may delay or prevent loan forgiveness for a subset of borrowers, the overall design of the regulations, including advance notice, transparency around

determinations, and employer recertification pathways, help prevent unexpected or retroactive harm. These borrowers will retain the ability to pursue PSLF through eligible employment elsewhere, thereby preserving the program's intended purpose.

For taxpayers, the final rule reduces the risk of improper use of taxpayer funds by ensuring that credit toward loan forgiveness is only granted in circumstances where individuals are actually engaging in lawful public service. Employers that engage in unlawful activity are not serving the public interest because their actions harm their communities and the public good. By limiting PSLF eligibility to borrowers employed by organizations that do not engage in unlawful conduct, the rule reinforces appropriate commonsense stewardship of Federal funds. Although the exact budgetary impact will depend on the number and size of employers that do not meet the revised definition in this final rule, the regulations are expected to reduce PSLF-related discharges in cases where forgiveness would otherwise go to borrowers employed at organizations acting contrary to the public good.

For the Department, the rule introduces new administrative responsibilities that include reviewing employer conduct, issuing determinations, notifying borrowers of status changes, and entering into and overseeing corrective action plans. Although these tasks will require the reallocation of Department staff and system resources, the use of existing standards, such as definitions grounded in Federal law and doctrines adopted by other agencies, and processes, will allow the Department to administer the regulations efficiently and consistently to prevent improper payments. As in other regulations administered by the Department, the final rule also codifies a clear evidentiary framework, such as relying on court judgments or plea agreements, which limit the need for new investigative and adjudicative processes.

Taken together, these regulations represent a necessary evolution of PSLF oversight. The costs associated with employer review and administration are modest and proportional to the benefits gained, including reducing improper payments and increasing transparency, program integrity, and taxpayer protection. Most importantly, this final rule strengthens the fundamental purpose of PSLF--to encourage borrowers to enter occupations that improve their communities and advance the public good while also guarding against the diversion of Federal benefits to organizations that harm their fellow Americans by engaging in illegal conduct.

Implementation Date of These Regulations: These regulations are effective on July 1, 2026. Section 482(c) of the HEA requires that regulations affecting title IV programs be published in final form by November 1, prior to the start of the award year (July 1) to which they apply.

Public Comment: On August 18, 2025, the Secretary published an NPRM for these regulations in the Federal Register; 13,989 parties submitted comments on the proposed regulations.

Comments: Several commenters explicitly urged the Department to extend the comment period. They argued that the proposed changes were introduced without adequate opportunity for meaningful public participation. Additionally, commenters argued that there was a lack of transparency and stakeholder engagement. They suggested that the short comment period undermined trust and fairness, claiming that important legal aid, nonprofit, and advocacy groups had little chance to weigh in.

Discussion: The Department disagrees with the commenters. The Department fully complied with the Administrative Procedure Act (APA) and requirements for negotiated rulemaking in the HEA. The comment period provided through the initial public hearing, negotiated rulemaking, and NPRM notice and comment process met the requirements established in law, giving the public numerous opportunities to provide feedback. Indeed, nearly 14,000 comments were received across diverse stakeholder groups, including those referenced by the commenters, within the established timeframe, demonstrating that interested parties were aware of the proposed changes and able to share feedback. In addition, the public engagement process, including the public comment period referenced by commenters, that the Department followed here is consistent with other title IV, HEA rulemakings. See e.g., Student Assistance General Provisions, 87 FR 41878 (proposed July 13, 2022) (providing for a 30-day comment period); Financial Value Transparency and Gainful Employment, 88 FR 32300 (proposed May 19, 2023) (providing for a 32-day comment period). The public has had ample opportunity to engage and provide feedback throughout the Department's rulemaking process. No substantive input has been ignored.

Changes: None.

Public Service Loan Forgiveness (Sec. 685.219)

Comments: Several commenters provided overarching commentary on the NPRM rather than commenting on specific provisions. Some commenters expressed their opinion that the rule was poorly conceived and duplicative of existing law, while others claimed that it will create confusion and uncertainty

for both borrowers and employers. A recurring theme was the perception that the NPRM lacked clarity on how it will be implemented. Several commenters questioned whether the proposed framework would be administered fairly and consistently. Others stated that finalizing the rule would undermine confidence in the whole Direct Loan program.

Discussion: The final rule is not duplicative because the Department does not currently consider whether an otherwise qualifying employer engages in illegal activities such that it has a substantial illegal purpose for PSLF-eligibility purposes. The Department does not agree that the rule will cause confusion because the Department will provide notice to both borrowers and employers in the event an employer is no longer eligible because the Department has determined it engaged in illegal activities such that it has a substantial illegal purpose.

The Department does not think that the rule will undermine confidence in the PSLF program because the rule will ensure that PSLF benefits are only being received by employees of organizations that are serving the public interest. By limiting eligibility in this way, the rule ensures that taxpayer funds are only used to indirectly subsidize employment at employers who are not breaking the law. As such, this final rule should increase confidence in the PSLF program by reducing improper payments to borrowers working for employers who are breaking the law and harming their respective communities.

Changes: None.

Comments: Many commenters expressed gratitude and strong approval for the Department's efforts to reform the PSLF program. They characterized the program as historically confusing, plagued by denial of benefits, and saw the proposed reforms as a long-overdue fix that will restore trust and usability.

Discussion: The Department agrees with the commenters and appreciates their support. The PSLF program has faced significant challenges over the years, including high denial rates, administrative barriers, and widespread confusion among borrowers. This final rule delivers clarity, fairness, and accountability for borrowers and qualifying employers under PSLF. It strengthens transparency and ensures PSLF is restored to its intended focus on public service for the betterment of communities. This final rule ends the subsidization of employment at organizations that are not only failing to serve the public interest but are actually doing harm by engaging in illegal conduct.

Changes: None.

Comments: Some commenters highlighted that strengthening the integrity of the PSLF program directly supports the recruitment and retention of professionals in public service careers such as teaching, nursing, social work, and government service. They emphasized that these reforms make it more feasible for individuals to dedicate their careers to public service without the burden of unmanageable debt.

Discussion: The Department agrees that the PSLF program makes it easier for borrowers to pursue public service careers; however, the rule is unlikely to materially alter those incentives like the commenters suggest. This is because the rule does not expand eligibility for the program and is thus unlikely to induce new borrowers, who are not currently participating or would not otherwise be inclined to participate, to work for a qualifying employer. We agree, however, that strengthening the program's integrity will likely improve public perception and support its long-term sustainability.

Changes: None.

Comments: Some commenters stressed that PSLF is not only beneficial for borrowers but also for the communities they serve. By making it possible for professionals to remain in public service roles, PSLF helps stabilize organizations that provide education, healthcare, safety, and social services. Several commenters noted that healthy, stable public service organizations generate positive externalities for the economy and society.

Discussion: The Department partially agrees with the commenters. PSLF is clearly beneficial to borrowers and the organizations that employ them, but it is also very costly for taxpayers who ultimately must bear the cost of loan forgiveness. Although this rule ensures PSLF has clear and consistent standards for qualifying public service employers in communities across the country, in some cases the program has created perverse incentives for colleges and universities to increase tuition costs and load unsustainable levels of debt onto students.\1\ Moreover, the waivers provided by the last Administration--waiving payments specifically required by statute-- provided PSLF loan cancellation benefits to thousands of borrowers who were sometimes years away from eligibility or who would never have been eligible under the statutory requirements of the program.\2\ Unlike the temporary and legally questionable actions taken by the last Administration, this final rule addresses a key shortcoming of the PSLF program--granting benefits for employment at organizations engaged in illegal activities such that it has a substantial illegal purpose-- through the proper rulemaking process.

\1\ Preston Cooper & Alexander Holt, Turn Public Service Loan Forgiveness into a State Block Grant, Ctr. on Opportunity and Soc. Mobility: AEIdeas (Apr. 17, 2025), https://cosm.aei.org/turn-public-service-loan-forgiveness-into-a-state-block-grant/.

\2\ Kaitlin Mulhere, It Just Got a Lot Easier to Qualify for Public Service Loan Forgiveness, Money (Oct. 6, 2024), https://money.com/public-service-loan-forgiveness-changes-waiver/.

Changes: None.

Comments: Several commenters emphasized that strengthening PSLF will restore public trust, not only in the program itself, but also in the Federal Government's ability to deliver on its promises to support public service careers. They argued that years of denial, poor communication, and unclear rules eroded faith in public service initiatives, and that these reforms provide a chance to demonstrate that government programs can work effectively, transparently, and fairly.

Discussion: The Department agrees that strengthening the PSLF program is essential for the restoration of taxpayer trust in PSLF. This final rule ensures that PSLF benefits are not misdirected to those working for organizations that are not serving the public interest. Years of inconsistent administration, ill-conceived waivers, and confusing standards have eroded public confidence in the PSLF program. This rule reverses that trend and delivers much-needed clarity, transparency, and accountability for borrowers and employers.

Changes: None.

Comments: Approximately 70 comments noted borrowers from underrepresented and economically disadvantaged backgrounds are more likely to pursue careers in public service as a result of the PSLF program. Some comments cited a report commissioned by the National Legal Aid & Defender Association to suggest borrowers are more likely to struggle with student loan debt in the absence of the PSLF program.\3\ They praised the PSLF program as a way to level the playing field, enabling a more diverse and representative public service workforce.

\3\ National Legal Aid & Defender Association (NLADA), Public Service Loan Forgiveness and the Justice System (Mar. 2025), https://www.nlada.org/pslf-and-justice.

Discussion: The Department disagrees that PSLF advances equity and inclusion efforts that improperly use

racial goals. PSLF is race-neutral and was not designed with any specific targeting of benefits to borrowers from underrepresented or economically disadvantaged backgrounds. Rather, PSLF is intended to provide financial incentives to borrowers from all backgrounds to work in jobs in the public service sector with qualifying employers. In some cases, the value of PSLF benefits to borrowers may help to incentivize those borrowers to seek employment or to remain employed with PSLF qualifying employers rather than seeking employment in other sectors. This final rule supports this objective by ensuring that PSLF benefits are not improperly granted to any borrower employed by an organization that does not meet the definition of a qualifying employer, regardless of the borrower's racial or socioeconomic background.

Changes: None.

Comments: Several commenters opposed the proposed rule in its entirety. Some commenters expressed their distrust of the Department's motives, suggesting that the rule was less about protecting program integrity and more about restricting access to loan forgiveness. Others feared that the rule will deter participation in public service jobs, and ultimately harm both borrowers and the communities that rely on them.

Discussion: The Department rejects the broad, unsubstantiated claims by these commenters. The standards in this rule bring clarity, consistency, and needed accountability to the PSLF program. The Department's motives are not pretextual or designed to limit access to PSLF beyond removing eligibility for organizations that engage in illegal activities such that they have a substantial illegal purpose. If an organization is found to have a substantial illegal purpose, any borrower working for such an employer may look for alternative employment with a qualifying employer if they wish to pursue PSLF. The Department acknowledges that borrowers who remain with an employer that loses eligibility will not receive credit toward loan forgiveness for months of employment at that employer who would have otherwise qualified prior to this final rule. These borrowers will have a choice to seek employment with a different qualifying employer. However, the Department believes that any harm to borrowers is outweighed by the Federal Government's interest in not allowing PSLF benefits to flow to borrowers who work for employers engaged in illegal conduct. The Department agrees that this final rule will serve as a deterrent for borrowers who may want to work for employers who are engaged in illegal activities such that the employer has a substantial illegal purpose and believes that kind of deterrence is appropriate as it creates incentives for organizations to avoid engaging in illegal activity. Furthermore, the Department emphasizes that this rule provides borrowers with advance notice regarding the types of activities that may constitute a substantial illegal purpose, thereby disqualifying an employer under the PSLF program. This transparency enables borrowers to make informed decisions about whether to begin or continue employment with a given organization. Additionally, borrowers will have sufficient time to assess their employment options and whether those options are impacted by these final regulations.

Changes: None.

Comments: Several commenters observed that PSLF is already “overly complicated and poorly managed.” They argued that adding what they viewed as subjective eligibility rules may deepen borrower confusion, making it harder for professionals in government and nonprofit work to continue through the PSLF program. They argued that borrowers will be penalized by their employer's activities rather than by their own individual actions.

Discussion: The Department disagrees. Under this final rule, borrowers will receive full credit for work performed until the effective date of the Secretary's determination that an employer engaged in illegal activities such that it has a substantial illegal purpose. Borrower payments will not count toward time to forgiveness when payments are made after a determination that an employer is an ineligible employer for the PSLF program. The Department believes that any confusion that may be created by this final rule will be outweighed by the corresponding benefits to the integrity of the PSLF program and reductions in indirect benefits to organizations engaged in illegal activity. The focus of this rule is appropriately on employers, as Congress requires the Department to ensure that borrowers are working for a qualifying employer before providing PSLF benefits to a borrower. This final rule is not intended to punish borrowers. The Department is not taking away any credit toward loan forgiveness for any qualifying payment that was made before their employer was deemed ineligible. A determination that an employer is no longer an eligible employer within the PSLF program has no bearing on a borrower's current or future participation in loan forgiveness programs. However, the Department acknowledges that some borrowers may lose access to PSLF benefits due to their employer's unlawful actions--actions potentially beyond borrowers' control but which the Department cannot overlook. The Department believes this is necessary to prevent future benefits from going to employees of employers that have engaged in illegal activities such that the employer has a substantial illegal purpose.

Changes: None.

Comments: Many commenters argued that the NPRM lacked clear standards, and that PSLF could be subject to shifting interpretations depending on the political environment. They warned that this uncertainty makes the program appear arbitrary and would leave both employers and employees vulnerable to sudden disqualification. This unpredictability, they argued, would undermine trust in PSLF and weaken its intended role as a stable incentive for public service.

Discussion: The Department rejects the claim that PSLF is left open to shifting political winds. This rule provides strong, clear standards anchored in law, not ideology. That clarity provides certainty for borrowers, confidence for employers, and accountability for taxpayers. Qualifying employers will only face uncertainty if they decide not to follow the law. Employers who follow the law will not be disqualified, and because most organizations follow the law, the Department believes the commenters' concerns about widespread changes in incentives to enter public service as a result of the rule are significantly overstated. By codifying objective standards, this final rule ties forgiveness to lawful public service for purposes of the PSLF program.

Changes: None.

Comments: Commenters claimed that the rule does not explicitly describe how determinations will be made, what counts as activity contrary to law, or how appeals will function. They argued that the absence of detail could create uncertainty for both borrowers and employers.

Discussion: The Department rejects the claim that the rule lacks clarity as to how determinations will be made. The Secretary will weigh any evidence presented showing that an organization's activities violated any laws and make a determination if those violations rise to the level of substantial illegal purpose. The Secretary will look

to see if there is a pattern of behavior by the organization, the gravity of the violation, and generally exclude evidence of technical violations of law. When reviewing an employer's conduct, the Secretary will consider any reliable evidence, including countervailing evidence provided by the employer. This final rule also establishes a reconsideration process for employers when they have been determined ineligible. Employers may seek review, submit documentation, and receive written explanations of the Secretary's determination. This approach ensures transparency, protects taxpayers, and maintains borrower confidence. Furthermore, the Due Process Clause of Fifth Amendment ensures that all entities that are subject to a Departmental adjudication are entitled to an unbiased adjudicator. This ensures that all entities have an adjudicator who has not prejudged the law or the facts, as applied, and that all decisions are supported by reliable evidence.

Changes: None.

Comments: Some commenters noted that, when borrowers lose PSLF benefits, it affects not just them but the communities they serve. Professionals might leave public service for private-sector roles, reducing the workforce available to meet urgent needs in education, healthcare, and social services. Commenters expressed specific concerns about borrowers employed in rural areas where finding another job may be difficult in the event their employer loses PSLF eligibility. They noted that alternative employment options in these areas may be rare, and borrowers may be forced to relocate for other employment opportunities in the event there are no other qualifying employers in their area.

Discussion: The Department acknowledges that it is possible if a borrower loses access to PSLF benefits due to this final rule that he or she could leave public service to find a job in the private sector. However, the degree to which this is likely to occur is speculative and will vary widely based upon the borrower's skills and abilities, where the borrower is living, other employment opportunities in the local community, and whether the borrower wants to continue to work in public service. The Department disagrees with the commenter that these speculative equities outweigh the benefits of the rule, which has been previously discussed.

The Department acknowledges there may be potentially fewer qualifying employers in rural communities than in more urbanized areas; however, as shown in Table 5.4 of the Regulatory Impact Analysis of this final rule, over 1 million borrowers have received PSLF benefits to date across more than 20 sectors of the economy. The Department must balance concerns that disqualification of qualifying employers in an area with few qualifying employers may result in fewer choices for borrowers seeking to benefit from PSLF against its primary responsibility to safeguard American taxpayer dollars and interests by ensuring that PSLF benefits are only received for work at qualifying employers that are serving the public interest.

The Department also disagrees with the assertion that this rule will have a significant macroeconomic impact on labor markets in education, healthcare, and social services in most areas. The commenter did not provide sufficient evidence to support this claim, and the Department finds no basis to conclude that such widespread effects are likely. As noted in the Regulatory Impact Analysis, because we expect most organizations to voluntarily comply with the rule, the Department anticipates that it will take action to remove eligibility for less than ten organizations per year. As presented in Table 5.2 of this final rule, to date, approximately 30 percent of borrowers receiving forgiveness through PSLF were employed by non-governmental entities. Accordingly, the Department believes the commenters' assertion is overstated and that this rule will not materially reduce the available workforce in education, healthcare, and social services.

Changes: None.

Comments: Several commenters noted that nonprofits, advocacy organizations, and religious institutions may self-censor or avoid lawful but controversial work for fear that PSLF eligibility could be withdrawn based on political interpretations. They stressed that PSLF should not create disincentives for organizations to pursue their missions independently, whether in areas like immigration, reproductive health, or civil rights.

Discussion: The Department does not believe the rule will require nonprofits, advocacy organization, or religious institutions to self- censor to avoid losing eligibility as a qualified employer. This final rule explicitly includes references to the U.S. Constitution relating to protecting rights under the First Amendment. This final rule could not, even without such explicit references, be enforced in a manner that contravenes the First Amendment; therefore, commenters' concerns that the Department will impede upon the First Amendment rights of these organizations are overstated and not consistent with the Department's own legal limitations. Lawful activity will not disqualify an organization, no matter how controversial or unpopular it may be. The Department will enforce the PSLF program neutrally and transparently, consistent with the law. Nonprofits and advocacy groups are free to pursue their missions without fear of interference from the Department, provided their actions are lawful. This rule strikes an appropriate balance between preserving independence, protecting borrowers, and safeguarding taxpayers while keeping the PSLF program focused on lawful, public service as the American people expect.

Changes: None.

Comments: Some commenters questioned the Department's authority to redefine or expand disqualification standards through regulation. They emphasized that the PSLF program was created by Congress with specific statutory language, and any meaningful change to qualifying employment categories should come directly from amendments to the statute rather than regulatory changes. They are worried that regulatory overreach could invite legal challenges, create uncertainty, and ultimately destabilize PSLF for borrowers. Also, some commenters stated that the Department was overreaching its authority, politicizing the PSLF program, and introducing unnecessary complexity into the program.

Discussion: The Department rejects the suggestion that this rule exceeds its legal authority. The HEA grants the Secretary explicit power to regulate title IV programs. PSLF is a title IV program, and its proper administration requires clear, enforceable standards that are often established and implemented through regulations issued by the Secretary. Establishing objective standards through the rulemaking process is not overreach and avoids politicizing the PSLF program. It is a lawful and common exercise of authority delegated by Congress. Borrowers deserve clarity and taxpayers deserve accountability, both of which this final rule provides. Furthermore, under the illegality doctrine, courts and the IRS have established that revocation of statutory benefits to organizations engaged in illegal activities is proper if its purposes and activities are illegal or otherwise contrary to public policy. See

Bob Jones Univ. v. United States, 461 U.S. 574, 591 (1983); \4\ see also Rev. Rul. 75-384, 1975-2 C.B. 204 (“[i]llegal activities, which violate the minimum standards of acceptable conduct necessary to the preservation of an orderly society, are contrary to the common good and the general welfare of the people in a community and thus are not permissible means of promoting the social welfare . . .”) Therefore, this rule fulfills the Department's obligation to enforce PSLF consistent with its statutory purpose--to only benefit those borrowers working for organizations that truly serve a public purpose by helping, not harming, their communities. This rule makes certain borrowers receive forgiveness only for lawful public service by shielding forgiveness from abuse. The Department is faithfully executing the law, not expanding it.

\4\ Bob Jones University is frequently invoked when discussing the so-called “public policy doctrine,” under which an organization's Section 501(c)(3) tax-exempt status may be revoked for engaging in conduct that is not specifically illegal. This occurs where there “can be no doubt that the activity involved is contrary to a fundamental public policy.” Bob Jones Univ., 461 U.S. at 592. In Bob Jones University, the Court determined that this standard was met, because the organizations' actions (i.e., the maintenance of racially discriminatory admissions policies) ran contrary to “every pronouncement of this Court and myriad Acts of Congress and Executive Orders.” Id. at 593. Although the public policy doctrine is similar to (and often discussed alongside) the illegality doctrine, the evidentiary bar set in Bob Jones University is different and applicable when revocation of an organization's tax-exempt status is based on conduct which is not explicitly illegal. Id. at 591 (“A corollary to the public benefit principle is the requirement, long recognized in the law of trusts, that the purpose of a charitable trust may not be illegal or violate established public policy.”) (emphasis added). By contrast, the bar for revoking an organization's Section 501(c)(3) tax-exempt status for engaging in or encouraging illegal activity is different, because actions that violate laws are inherently contrary to public policy in that the political branches (legislative and executive branches through bicameralism and presentment) have created positive law to counter the conduct at issue. See I.R.S. Gen. Couns. Mem. 34631 (Oct. 4, 1971) (citing I.R.S. Gen. Couns. Mem. 31376 (Aug. 14, 1959)).

Changes: None.

Comments: Several commenters pointed specifically to 20 U.S.C. 1087e(m)(3)(B), which outlines definitions of public service job categories, and questioned whether the Department has authority to alter or clarify these categories through rulemaking. They argued that, by creating new standards of disqualification, the Department may be venturing beyond clarifying existing law into substantively redefining the statute, a role they asserted belongs solely with Congress.

Discussion: The Department disagrees that the amendments made in this final rule are ultra vires. Section 1087e(m)(3)(B) provides the statutory categories, but it is the Department's responsibility to interpret and apply those categories in a way that ensures PSLF operates as the statute requires. This rule does not rewrite the statute. It fills out the statutory scheme Congress placed under the Department's supervision. In defining a public service job under the HEA, Congress listed 18 distinct categories of jobs. Within four of those categories (“public health,” “public interest law services,” “early childhood education,” and “government”), Congress provided parentheticals to provide some additional detail as to what types of jobs within each of those categories they meant to include or exclude. In addition, within the list of public service jobs, Congress included employment at an organization that is described in Section 501(c)(3) of the Internal Revenue Code. In the list of all 18 distinct categories, there is considerable overlap among the categories. For example, the categories of “military service,” “law enforcement,” “public library sciences,” and “public education” are also included within the “government” category. Likewise, there is overlap between “public interest law services (including prosecution or public defense or legal advocacy on behalf of low-income communities at a nonprofit organization)” and organizations that are described in Section 501(c)(3) of the Internal Revenue Code.

To make sense of these overlapping and arguably duplicative categories, it is important to consider the level of generality at which Congress approached the problem. Indeed, Congress provided for a long list of eligible professions to broadly ensure that all professions that advance the public interest were included in the list. This provides an important clue in interpreting the underlying statute, as the Department must presume that Congress would not want PSLF benefits to be received by employees of organizations that the Department knows are not serving the public interest. This includes organizations that are breaking the law, which is contrary to the public interest. Surely, Congress would not want to reward organizations that break the law and have a substantial illegal purpose by indirectly subsidizing their organizations by providing loan forgiveness to their employees.

Furthermore, although it is possible that the IRS could take independent action to revoke Section 501(c)(3) tax-exempt status from an organization engaging in illegal conduct, that same organization (absent action from the Department) could remain eligible for PSLF (assuming it still met the requisite criteria for nonprofit organizations) and continue to employ individuals in public service jobs if those jobs meet another part of the definition under 20 U.S.C. 1087e(m)(3). For example, an organization that is organized as a nonprofit and provides State-funded prekindergarten services could lose Section 501(c)(3) status under the Internal Revenue Code but remain an eligible employer under previous versions of the Department's regulation. Similarly, an organization that the Department determines has a substantial illegal purpose may continue to be exempt under Section 501(c)(3) because its tax-exempt status has not been revoked, a determination made by the IRS. This final rule provides that the Department can act in these circumstances, removing eligibility when the Department finds the organization has engaged in illegal activities such that it has a substantial illegal purpose.

This rule advances the statutory scheme Congress created in section 455(m)(3)(B) of the PSLF statute in the HEA, which includes multiple references to public service in defining public service job.

Changes: None.

Comments: A significant number of commenters argued that the Department lacks statutory authority to apply a “preponderance of the evidence” standard in making employer disqualification determinations. Commenters claimed the “preponderance of the evidence” standard is inappropriately low. They contended that such a standard is inappropriate for decisions with major financial consequences and instead urged exclusive reliance on final judicial or administrative findings. Some commenters indicated that Congress needs to provide explicit authorization for the Department to proceed with this evidentiary framework.

Discussion: The Department rejects the claim that it lacks authority to establish an evidentiary standard and has utilized this same standard in other title IV regulations. This rule does not preclude legal activities that assist groups mentioned by the commenters. This includes any lawful work performed by legal aid attorneys, nonprofit law offices, community legal clinics that provide direct legal services, public defense, civil rights litigation and advocacy organizations, and other

activity that support low-income or disadvantaged people.

The Department will solely enforce this rule against organizations that participate in illegal activity such that they have a substantial illegal purpose. Congress, through the HEA, granted broad authority to regulate title IV programs. The preponderance of the evidence standard is well established in administrative law for civil adjudications and is fair and consistent with longstanding Federal practice. It ensures decisions are grounded in fact, not speculation, and allows the Department to act promptly to protect both borrowers and taxpayers. Here, in applying the preponderance of the evidence standard to the substantial illegal purpose test, the Secretary will need to find that it is more likely than not that an organization's illegal activity is more than an insubstantial part of its activities that advance an illegal purpose. Plea agreements or admissions of illegal conduct in settlements could provide sufficient proof of unlawful activity to warrant program action, ensuring accountability without waiting for final judicial or administrative findings that could otherwise delay enforcement and allow misconduct to persist. The Department has the responsibility to safeguard PSLF and ensure taxpayer funds are directed only to encourage lawful public service. This evidentiary framework provides the Department with discretion to act swiftly to ensure that taxpayer resources are not wasted to ensure fairness for employers and borrowers.

Changes: None.

Comments: Commenters raised concerns that PSLF program eligibility could be used as a political tool to compel alignment with an administration's priorities. They suggested that this could limit free speech and advocacy while potentially undermining the independence of public service groups.

Discussion: The Department rejects this unsubstantiated concern. The standards for qualifying employment are not intended, nor do they regulate policy preferences, advocacy, or discriminate based upon viewpoint.

The standards are limited to ensuring that employers meet statutory requirements for lawful public service activities. Organizations that abide by Federal law and the laws of the State in which they operate will not be subject to potential loss of eligibility. PSLF employer eligibility is not conditioned on political alignment or conformity with any administration policies. Determinations regarding whether an organization has engaged in illegal activities such that it has a substantial illegal purpose will be objective and based on evidence such as judgments of State or Federal courts, guilty pleas of the organization, or statements by the organization admitting that it engaged in such conduct (such as in a settlement agreement). It will not be colored by the policy preferences of an employer. Here, the Department is not regulating viewpoint and will enforce the regulation in a manner that does not take viewpoint into account. This approach does not interfere with the policy preferences or advocacy efforts of public service organizations and safeguards taxpayer funds by ensuring benefits are delivered only to organizations that are not engaged in illegal activities such that they have a substantial illegal purpose. The Department will administer the PSLF program neutrally to keep the program focused on its purpose of supporting careers in qualified public service, notwithstanding the policy preferences or viewpoints of the public service employer.

Changes: None.

Comments: Many commenters expressed concern that the Department will apply the rule in a way that punishes organizations based on political ideology or affiliation rather than on legitimate unlawful conduct. They worried that nonprofit and advocacy organizations could be stripped of PSLF eligibility because their missions or policy stances differ from the administration.

Discussion: The Department will administer the PSLF program in a manner that provides borrowers with the benefits required by statute, while ensuring the responsible stewardship of taxpayer resources. As discussed in the previous comment, the Department cannot take action against an employer because of their viewpoint or policy preferences. However, when employers break the law, such that the organization has a substantial illegal purpose, the Department may take action to safeguard the integrity of the PSLF program by removing eligibility from that employer. The Department cannot and will not prejudge the facts or the law with respect to specific employers, but organizations that follow the law will not be subject to adverse action under this final rule.

Changes: None.

Comments: Some commenters expressed concern that even if the Department does not intend to use PSLF in a political way, the lack of precise definitions and safeguards could create the perception of arbitrary or politically motivated enforcement. They emphasized that the appearance of bias can be as damaging as actual bias, eroding public trust and discouraging organizations from engaging in lawful advocacy work.

Discussion: The Department recognizes that it is possible that enforcement under the regulation could be perceived as politically motivated, but perceptions are not often reality. The perception of some members of the public as to why the Department takes an action should not control or impair the Department's ability to take action, lest the Department become captive to popular perception of the underlying motivation whether true or not. The Department does not intend to take enforcement action based on pretextual grounds. Adverse action will be taken only where the evidence demonstrates that an organization has a substantial illegal purpose.

If the Department takes action under this regulation, impacted entities will receive notice and an opportunity to respond prior to any determination.

Changes: None.

Comments: Some commenters claimed that this rule is an overreach of executive power and unconstitutional because it creates new disqualification standards not explicitly authorized by Congress. Other commenters argued that the proposed rule deals with a major question under the Major Questions Doctrine and that the Department lacks a clear congressional authorization to promulgate the rule.

Discussion: The Department disagrees that the rule is a form of executive overreach or that it is unconstitutional. The HEA gives the Secretary clear and broad authority to regulate title IV programs, such as PSLF. This final rule is firmly within that authority.

The history surrounding the creation and use of the illegality doctrine is instructive in assessing whether this rule is unconstitutional or is a form of executive overreach. Indeed, courts have upheld the use of the illegality doctrine in the context of administering the Internal Revenue Code relating to organizations that engaged in activities that are illegal or otherwise contrary to public policy. See e.g., Bob Jones Univ., 461 U.S. at 591 (holding that an organization may be denied tax-exempt status if its purposes or activities are illegal or otherwise contrary to public policy), Church of Scientology of Cal. v. Comm'r, 83 T.C. 381 (1984) (upholding revocation of tax-exempt status for a religious organization because of its conspiracy to defraud the United States, which violated established public policy). These cases demonstrate that the Department is implementing

established legal standards when determining whether organizations are engaging in public service by examining whether they engage in activities that are illegal such that they have a substantial illegal purpose. These actions, like those taken by the IRS, are not unconstitutional nor do they amount to executive overreach. Furthermore, the Department disagrees that the rule is a major question under the Major Questions doctrine. The doctrine generally requires Congress to speak clearly if it wishes to assign to an agency decisions of vast economic and political significance. West Virginia v. EPA, 597 U.S. 697, 716 (2022) (internal quotations omitted). There is not a bright line standard for what constitutes a major question, but courts look to the breadth of the authority asserted and its economic and political significance. The Supreme Court has found that the Major Questions Doctrine is implicated, for example, where the actions of an agency impact the price of energy for nearly all Americans, where the Secretary attempts to cancel upwards of $500 billion in Federal student loan debt for millions of borrowers, and where millions of health insurance subsidies would be impacted. See e.g., West Virginia, 597 U.S. at 716; Biden v. Nebraska, 600 U.S. 477, 505 (2023), King v. Burwell, 576 U.S. 473, 135 (2015). Here, the Department estimates that this final rule may impact less than ten employers per year across the country. Furthermore, the rule makes no substantive changes to the legality of certain actions but changes the consequences for breaking the law where an employer has a substantial illegal purpose. The Major Questions Doctrine, as articulated by the Supreme Court, is not applicable when a rule impacts less than ten employers per year and does not prohibit lawful conduct.

Changes: None.

Comments: Many commenters provided examples of organizations aiding refugees and asylum seekers, which they believe to be lawful activities. Commenters were concerned that depending on political motivations, these actions could be deemed “illegal.” Commenters believed that advocacy or humanitarian groups could face disqualification despite acting within the law.

Discussion: The Department disagrees with the commenters' concerns. In the first instance, Federal law prohibits individuals from aiding, abetting, counseling, commanding, inducing, or procuring another to commit a crime against the United States. 18 U.S.C. 2. Any individual who engages in such practices to assist illegal immigrants in breaking Federal law may violate 18 U.S.C. 2. Federal law does not prohibit individuals from advocating for illegal immigrants or representing them in Federal immigration court. Organizations that do not aid or abet in criminal activity will not be disqualified from participating in the PSLF program, while organizations that participate in unlawful behavior may have a substantial illegal purpose depending on the nature of the offenses. PSLF determinations under this final rule will not be made based on the political views or policy preferences of the organization. Rather, any decisions will be made based upon the factual record of the underlying actions the organization has taken and whether such actions violate the law. This rule does not preclude legal activities that assist groups mentioned by the commenters. The Department will only enforce this rule against organizations that participate in illegal activity such that they have a substantial illegal purpose.

Changes: None.

Comments: Commenters argued that existing statutes governing nonprofit conduct (for example, IRS regulations, State charity laws, and criminal statutes) already prohibit organizations from engaging in illegal activity. Creating additional rules through PSLF is seen as duplicative and unnecessary. Commenters also argued that there may be the potential for an irreconcilable conflict to arise for public service professionals where actions mandated by laws like the Individuals with Disabilities Education Act (IDEA), Emergency Medical Treatment and Active Labor Act (EMTALA), and Family Educational Rights and Privacy Act of 1974 (FERPA) or actions required by professional code, could be subjectively misinterpreted as illegal activities that have a substantial illegal purpose.

Discussion: The Department acknowledges that rules at the Federal and State levels broadly prohibit nonprofit organizations from engaging in illegal conduct, but the Department disagrees that this final rule is duplicative of those efforts. Indeed, as explained previously, Congress created a broad definition of public service job to capture a broad array of public service employment. Even if the IRS or a State takes action to revoke an organization's tax-exempt status, the organization may still satisfy the definition of a public service employer and, therefore, would remain eligible for participation in the PSLF program. Accordingly, the Department would need to act to ensure that any organization that engages in illegal activities such that it has a substantial illegal purpose is not able, through its employees, to benefit from the PSLF program.

The Department considered alternatives here, namely that because the IRS could take independent action, it may not be necessary for the Department to make the changes in this rule. However, just like all executive branch agencies, the IRS has resource constraints that limit its ability to act against organizations under the illegality doctrine and must exercise some degree of prosecutorial discretion. This means that, at least at times, the illegality doctrine will be underenforced. In other words, there may be instances where some organizations that have a substantial illegal purpose continue to have IRS tax-exempt status.

The Department has a heightened interest in ensuring that the PSLF program is administered in a manner that safeguards against improper payments. Indeed, the median balance forgiven for borrowers through PSLF is $65,000 so the Department has a significant monetary interest in ensuring that only months of work in lawful public service employment are counted toward forgiveness.\5\ The Department's interest here stands separate and apart from any interest the IRS has in taking action to revoke tax-exempt status, because Congress assigned the Department the responsibility to administer and oversee the PSLF program. Because of the Department's independent interest in preventing misuse of taxpayer resources, as well as the fact that the IRS may not always revoke the tax-exempt status of organizations engaging in activities that amount to having a substantial illegal purpose, the Department does not believe that this final rule is duplicative.

\5\ FY25 Department of Education Justifications of Appropriation Estimates to the Congress, Volume II, Student Loans Overview, page 9.

With respect to the commenter's assertion that the rule is duplicative because State taxing authorities or other parts of State government may also act against organizations engaged in activities that amount to having a substantial illegal purpose, the Department disagrees. State action has no bearing on eligibility for the PSLF program, so any State action will not necessarily impact employer eligibility for PSLF, which necessitates the need for the Department to be able to take independent action.

Regarding the comments raising the potential for the rule to conflict with existing Federal laws or State professional codes, the Department does not believe this rule conflicts with any laws. If there were a conflict between Federal law and State law with respect to the illegal conduct considered by the Secretary under this final rule, ordinary principles of Federal preemption law would apply. See McCulloch v. Maryland, 17 U.S. 316, 427 (1819) (holding that a State law in conflict with Federal law is without effect). Nothing in this final rule directly preempts State law, and instead broadly defers to State law. The Department is not aware of any conflicts between this final rule and existing Federal and State laws.

Changes: None.

Comments: Commenters argued that the Department's proposal improperly utilizes the illegality doctrine developed by the IRS and the courts by applying doctrines developed in a tax context to a statutory loan forgiveness program. Some commenters also argued that the Department has misconstrued the illegality doctrine to cover a much wider range of conduct and activities than the doctrine has been applied to by the IRS, which could open the door to political misuse, disqualifying organizations based on contested interpretations of law rather than clear violations. Additionally, some commenters questioned the Department's authority to identify specific types of illegal conduct as a basis for determining that an organization is not a qualifying employer for the purposes of the PSLF program, instead of considering all illegal conduct.

Discussion: The Department disagrees that it is improper for the Department to rely on the illegality doctrine when determining whether an employer qualifies for participation in the PSLF program. PSLF is a statutory benefit designed to encourage public service. The illegality doctrine provides a starting point for the Department to base the concept of excluding organizations with a substantial illegal purpose from PSLF, as the illegality doctrine provides a clear basis for denying certain statutory benefits to organizations whose aims and activities are harmful to the public interest. Furthermore, the substantial amount of case law that has been generated regarding the illegality doctrine demonstrates that courts have long recognized that government benefits are not required to flow to organizations whose purposes conflict with law. See, e.g., Bob Jones Univ., 461 U.S. at 591 (holding that an organization may be denied tax-exempt status if its purposes or activities are illegal or otherwise contrary to public policy); Church of Scientology, 83 T.C. at 506 (holding that denial of an organization's Section 501(c)(3) tax-exempt status was proper where the purpose of the organization was engaging in criminal tax fraud); Mysteryboy, 99 T.C.M. (CCH) 1057 (holding that an organization that promoted activities which are prohibited by Federal and State laws did not qualify for tax-exemption under Section 501(c)(3)).

As mentioned above, the history surrounding the creation and use of the illegality doctrine is instructive in assessing whether this final rule is unconstitutional or is a form of executive overreach. Indeed, courts have upheld the use of the illegality doctrine in the context of administering the Internal Revenue Code to revoke tax-exempt status from organizations that have a substantial illegal purpose. The Department rejects the supposition that the illegality doctrine can only be applied within the context of Section 501(c)(3) of the Internal Revenue Code. The way the IRS interprets the Internal Revenue Code is very similar to what the Department is doing in interpreting the phrase “public service.” See e.g., Rev. Rul. 75-384, 1975-2 C.B. 204 (finding that an organization which encouraged civil disobedience did not qualify for tax-exemption as a Section 501(c)(4) organization operated exclusively for the promotion of “social welfare,” on the basis that “[i]llegal activities, which violate the minimum standards of acceptable conduct necessary to the preservation of an orderly society, are contrary to the common good and the general welfare of the people in a community and thus are not permissible means of promoting the social welfare”). Courts and the IRS have established that denial or revocation of an organization's tax-exempt status is appropriate when its purposes and activities are illegal or otherwise contrary to public policy. See Bob Jones Univ., 461 U.S. at 591; Rev. Rul. 75-384, 1975-2 C.B. 204. Both the amount of time and attention an organization spends on the unlawful activities and the seriousness of the unlawful activities are relevant considerations. See, e.g., I.R.S. Gen. Couns. Mem. 34631 (Oct. 4, 1971)(stating, as an example, that “[a] great many violations of local pollution regulations relating to a sizable percentage of an organization's operations would be required to disqualify it from 501(c)(3) exemption” but “if only .01% of its activities were directed to robbing banks, it would not be exempt”).\6\ Taken together, the Department believes that the illegality doctrine can clearly be applied in scenarios outside of just those where the IRS has utilized it in the past, so long as it is used to respond to conduct that is clearly unlawful and substantial in nature.

\6\ The Department understands and acknowledges that IRS General Counsel Memoranda (“GCMs”) do not represent binding precedent. However, because GCMs demonstrate the way the IRS approached a discrete situation, they include persuasive legal analysis which may be applicable in analogous situations. The GCMs cited within this final rule are cited only as examples that the Department looked to while crafting this rule.

In crafting this rule, the Department looked to President Trump's Executive Order on Restoring Public Service Loan Forgiveness, Executive Order 14235 (Mar. 7, 2025), which identified the forms of unlawful activity that would merit denying an organization qualifying employer status for the purpose of the PSLF program. Although the Department believes that it would be legally permissible for the Department to deny qualifying employer status to organizations for a wider range of unlawful conduct than those set forth in that Executive Order, the Department believes that the Executive Order clearly indicates the areas that the President has identified as being of greatest concern. Furthermore, the Department's enumeration of specific forms of unlawful activity is consistent with the broad powers of prosecutorial discretion of the executive branch. See United States v. Nixon, 418 U.S. 683, 693 (1974) (citing Confiscation Cases, 74 U.S. 454 (1869); United States v. Cox, 342 F.2d 167, 171 (5th Cir.), cert. denied sub nom. Cox v. Hauberg, 381 U.S. 935 (1965)) (“[T]he Executive Branch has exclusive authority and absolute discretion to decide whether to prosecute a case . . .”); United States v. Fokker Servs. B.V., 818 F.3d 733, 741 (D.C. Cir. 2016) (citing Cmty. for Creative Non-Violence v. Pierce, 786 F.2d 1199, 1201 (D.C. Cir. 1986); ICC v. Bhd. of Locomotive Eng'rs, 482 U.S. 270, 283 (1987)) (“[J]udicial authority is . . . at its most limited when reviewing the Executive's exercise of discretion over charging determinations.”) (cleaned up); Wayte v. United States, 470 U.S. 598, 607 (1985) (citing United States v. Goodwin, 457 U.S. 368, 380, n. 11, (1982); Marshall v. Jerrico, Inc., 446 U.S. 238, 248 (1980)) (“In our criminal justice system, the Government retains

broad discretion as to whom to prosecute.” (cleaned up)).

The Department understands the March 7, 2025, Executive Order as being a directive from the President regarding how he would like the Department to exercise our prosecutorial discretion in taking enforcement actions where organizations are engaged in illegal conduct, and this final rule is focused on specific illegal conduct that he has determined that the Department should focus on. Finally, the Department believes that the identification of specific forms of unlawful activity will have the effect of reducing uncertainty for borrowers when considering prospective employers and for employers when making business decisions.

Changes: None.

Comments: Many commenters argued that existing regulatory regimes already prohibit unlawful activity by nonprofits, charities, and public service organizations. They pointed to IRS oversight, State charity laws, and criminal statutes as sufficient safeguards. They argued that layering additional PSLF-specific disqualification standards is duplicative, unnecessary, and could create conflicting enforcement regimes. Commenters warned that this approach risks burdening compliant organizations and confusing borrowers, while doing little to improve PSLF program integrity.

Discussion: The Department disagrees with the view that the PSLF program should rely exclusively on other enforcement mechanisms and other Federal agencies to enforce the provisions of programs enacted under the HEA. As stated previously, tax exemption, State charity oversight, and criminal prosecution all serve distinct purposes, but none are designed to administer title IV loan forgiveness. PSLF is a Federal benefit program, and it requires its own eligibility safeguards to ensure taxpayer resources are not diverted to unlawful activity. The Department cannot abdicate this responsibility to outside agencies. This final rule complements, rather than duplicates, existing law. It uses established legal definitions and works in tandem with the IRS, State, and other Federal entities, while maintaining the Department's independent responsibility to administer the PSLF program--a responsibility that Congress clearly provided to the Department. A determination by the Department regarding whether an organization satisfies the requirements to be considered a qualifying employer for the purposes of PSLF is not a determination by the Department regarding that organization's tax-exempt status.

Borrowers deserve certainty and taxpayers deserve assurance that their dollars are used to encourage lawful activities that promote the public good. This framework delivers both by aligning PSLF with lawful public service and protecting the program's integrity.

Changes: None.

Comments: Commenters asserted that the proposed rule violates the First Amendment to the U.S. Constitution by conditioning PSLF program eligibility on the political or ideological missions of employers. They argued that excluding borrowers based on their employer's policy positions constitutes impermissible viewpoint discrimination. Commenters also expressed concern that the rule could reduce lawful advocacy and infringe upon employees' rights to freely associate with nonprofit organizations engaged in public service.

Discussion: The Department rejects the claim that this final rule will result in a reduction of lawful advocacy and public service. The United States Supreme Court has repeatedly emphasized that government cannot condition access to public benefits on the surrender of constitutional rights, including freedom of speech and association. See e.g., Perry v. Sindermann, 408 U.S. 593, 597 (1972) (stating “this Court has made clear that even though a person has no right to a valuable governmental benefit and even though the government may deny him the benefit for any number of reasons, there are some reasons upon which the government may not rely. It may not deny a benefit to a person on a basis that infringes his constitutionally protected interests--especially, his interest in freedom of speech.”) (cleaned up).

The Department continues to assert that PSLF employer determinations will not be based on the viewpoint or advocacy positions of nonprofit or governmental employers or their employees. Instead, the Department will anchor eligibility exclusively in lawful service to the public, consistent with 20 U.S.C. 1087e(m)(3)(B), which defines qualifying employment to include all government and Section 501(c)(3) organizations. Borrowers and employers may continue to engage in lawful advocacy without fear that PSLF will be used as a tool of ideological enforcement.

Changes: None.

Comments: Commenters voiced constitutional concerns under the Due Process Clause of the Fifth Amendment to the U.S. Constitution, specifically in relation to the phrase “substantial illegal purpose.” They described this language as vague, ambiguous, and subject to shifting interpretation depending on political context. They

said the rule is unconstitutionally void for vagueness because key terms are ambiguous, subjective, overly broad, ill-defined, lack objective standards, and therefore fail to provide adequate notice of prohibited conduct.

According to commenters, the absence of clear definitions deprives borrowers and employers of fair notice and creates the risk of arbitrary enforcement. Commenters also stated that granting broad discretion to the Secretary without certain procedural safeguards could undermine due process by enabling decisions that could be inconsistent, opaque, or politically motivated.

Additionally, some commenters said the disqualification process violates constitutional due process by failing to provide adequate procedural safeguards and lacks a clear process for notice, a formal hearing, or a meaningful appeal to a neutral adjudicator.

Other commenters stated that the rule is procedurally unjust because it denies individual borrowers due process by failing to provide a clear, sufficient, or accessible appeals process to challenge an employer's disqualification. Commenters argued that employees are more directly and personally harmed under the rule, and as such, they should have recourse to correct potential errors, especially as some employers may choose not to challenge their disqualification.

Discussion: The Department takes these due process concerns seriously. Courts have long held that vague standards fail when they create uncertainty and invite arbitrary enforcement. See e.g., Grayned v. City of Rockford, 408 U.S. 104, 108 (1972) (“It is a basic principle of due process that an enactment is void for vagueness if its prohibitions are not clearly defined.”). A law can be considered void for vagueness when an average citizen cannot generally determine what persons are regulated, what conduct is prohibited, or what punishment may be imposed. See Johnson v. United States, 576 U.S. 591, 595 (2015); see also Kolender v. Lawson, 461 U.S. 352, 357-58 (1983) (stating that a law is void unless it is defined with “sufficient definiteness that ordinary people can understand what conduct is prohibited and in a manner that does not encourage arbitrary and discriminatory enforcement”); Vill. of Hoffman Estates v. Flipside, Hoffman Ests., Inc., 455 U.S. 489, 498 (1982) (“A law that does not reach constitutionally protected conduct and therefore satisfies the overbreadth test may nevertheless be challenged on its face as unduly vague, in violation of due process.”); Papachristou v. City of Jacksonville, 405 U.S. 156, 162 (1972) (“Living under a rule of law entails various suppositions, one of which is that (all persons) are entitled to be informed as to what the State commands or forbids.” (quoting Lanzetta v. New Jersey, 306 U.S. 451, 453 (1939) (cleaned up)). This rule clearly defines to whom the requirements apply, the conduct that is prohibited and the consequence of engaging in illegal activities for an employer who qualifies in the PSLF program. This final rule does not create new substantive prohibitions; it merely changes the consequences for the organization that is engaging in illegal activity such that it has a substantial illegal purpose. The underlying legal prohibitions are broad, but broad prohibitions are permitted so long as there is adequate notice of what is prohibited. Furthermore, the clear and defined parameters of the rule will help the Department avoid arbitrary enforcement of the rule, which is an important goal of the void for vagueness doctrine.

The Department acknowledges that its original definition in the draft regulations first presented to the negotiated rulemaking committee was broader and less precise than what was proposed in the NPRM. To ensure employers and borrowers have fair notice, and after having discussed issues and concerns during negotiated rulemaking, the Department refined the definition of “substantial illegal purpose” and several other definitions in the NPRM to better clarify the illegal activities that could lead to an employer being disqualified from participation in PSLF.

Additionally, under the process proposed in the NPRM, in section 682.219(j), employers will be provided with a notice, a transparent record, and an opportunity to review, respond, and rebut the Department's findings to a neutral adjudicator, thereby ensuring that due process is afforded to all impacted stakeholders and applied fairly and consistently. The rule also provides an opportunity for employers to regain eligibility by following a corrective action plan to come into compliance after a loss of eligibility. If the processes established in this final rule do not resolve a concern, employers can seek judicial review of the Department's decisions in Federal court. The Administrative Procedure Act (APA) provides default rules establishing procedures for judicial review of Federal agency actions. 5 U.S.C. 706. If an employer has exhausted the administrative remedies established in this rule and meets all of the other legal requirements to file a complaint, it can challenge the Department in Federal court.

Finally, the Department believes that employers are better situated than borrowers to respond to preliminary findings from the Department about the employer's eligibility. Employees may not have sufficient information to provide the Department with a full evidentiary framework to consider because they may not be privy to employer actions or decisions. Employers may include information in their submissions regarding the impact eligibility determinations may have on their employees.

Changes: None.

Comments: Several commenters raised concerns that the proposed rule may violate the Fifth Amendment's Due Process Clause, asserting it disproportionately targets organizations that serve marginalized populations and could unlawfully deprive borrowers and employers of PSLF benefits without adequate notice, procedural safeguards, or a meaningful opportunity to be heard. Commenters argued that altering program eligibility or redefining qualifying employment could constitute an arbitrary or retroactive deprivation of benefits on which participants had reasonably relied. Several other commenters also asserted that the proposed rule violates the Due Process Clause of the Fifth Amendment by altering PSLF eligibility criteria in a manner that could deprive borrowers or employers of benefits without adequate procedural safeguards. Some commenters further alleged that the rule would have a disproportionate effect on nonprofit entities serving marginalized or disadvantaged populations, raising concerns under both due process and equal protection principles implicit in the Fifth Amendment.

Approximately 50 commenters further contended that the rule would disproportionately affect organizations serving marginalized or disadvantaged populations, such as those providing legal services, social support, and educational or healthcare access to low-income, minority, and immigrant communities. These commenters asserted that narrowing PSLF eligibility based on organizational mission or activities could effectively exclude nonprofit employers that advance equity and civil rights goals (e.g., in work related to immigrant communities, LGBTQ+ individuals, or racial justice initiatives), thereby compounding inequities the program was designed to mitigate.

Discussion: The Department agrees that the PSLF program must be administered in a neutral manner, without targeting organizations because of their viewpoint or activism. The Department would have no basis to remove eligibility from nonprofits engaged in work related to immigrant communities, LGBTQ+ individuals, or racial justice if those organizations are following the law. As such, the Department disagrees that this final rule would unfairly disadvantage the referenced types of groups.

As discussed throughout, the Department promulgates this rule under its authority in 20 U.S.C. 1087e(m) and HEA to administer the PSLF program and ensure consistent, lawful application of its requirements. In evaluating comments addressing constitutional issues, the Department considered whether any aspect of this rule implicates procedural or substantive rights under the Fifth Amendment.

The Department carefully considered concerns regarding the Fifth Amendment and concludes that the rule is fully consistent with constitutional requirements. The rulemaking process provides notice and an opportunity for public comment, as required under the Administrative Procedure Act (5 U.S.C. 553), satisfying the procedural component of due process. This final rule applies prospectively and does not rescind previously granted loan forgiveness or otherwise retroactively alter qualifying employment determinations. Accordingly, it does not implicate a constitutionally protected property interest. See Bd. of Regents v. Roth, 408 U.S. 564, 577 (1972) (“To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it. It is a purpose of the ancient institution of property to protect those claims upon which people rely in their daily lives, reliance that must not be arbitrarily undermined.”)

With respect to the alleged disparate impact on organizations serving marginalized populations, the Department emphasizes that PSLF eligibility is determined according to statutory criteria established in 20 U.S.C. 1087e(m). Eligibility determinations are made by considering the activities employers engage in that are unlawful either under Federal or State law, without respect to the impact it may or may not have on individuals based upon any protected characteristics. This final rule interprets those provisions in a neutral manner, without regard to the employer's mission, ideological orientation, or the population it serves. The mere disparate impact of a facially neutral rule does not, without evidence of intentional discrimination, establish a constitutional violation. See Washington v. Davis, 426 U.S. 229, 242 (1976) (holding that a law which is “neutral on its face and serving ends otherwise within the power of government to pursue,” was valid under the Equal Protection Clause despite the law adversely impacting individuals from one race more than others).

The Department therefore finds that the rule neither infringes upon due process rights nor results in an unlawful disparate treatment or denial of equal protection under the Fifth Amendment.

Accordingly, the Department continues to assert that lawful advocacy or provision of services to immigrant communities, LGBTQ+ individuals, or racial justice organizations does not disqualify an employer from participating in the PSLF program. Only where a determination has been made that an organization is engaging in illegal activities such that it has a substantial illegal purpose will PSLF eligibility be at issue.

Changes: None.

Comments: Some commenters felt that the rule violates the Contracts Clause by unilaterally renegotiating the terms of existing agreements with borrowers, which they argue breaks the trust of individuals who made significant career and financial decisions in good-faith reliance on the government's promise and allows the Department to withdraw promised benefits based on its opposition to a borrower's work. Similarly, some commenters argued the rule violates legal principles like promissory estoppel, and that the government is legally and morally obligated to honor its commitment after borrowers have upheld their end of the agreement through years of service and payments.

Discussion: The Department rejects the contention that the rule violates the Contracts Clause by unilaterally renegotiating the terms of existing agreements with borrowers. In the first instance, the Contracts Clause only applies to States, not the Federal Government. Furthermore, the contractual instrument the Department uses when originating loans, the master promissory note (MPN), explicitly disclaims the notion that terms and conditions of Federal student loans are fixed and cannot be changed through the legal process. When a borrower signs an MPN, the MPN is valid for additional Federal student loans the borrower takes out for ten years, with certain exceptions. This means that borrowers may receive multiple or serial loans for up to ten years from the date the borrower signed the MPN. By signing the MPN, borrowers agree to the terms and conditions of the loans while acknowledging that terms and conditions of those loans may be changed. Specifically, the MPN explicitly states that its terms and conditions “are determined by the HEA and other federal laws and regulations.” \7\ MPN at 3. Section 1 of the Borrower's Rights and Responsibilities Statement (BRR) provided with the MPN further clarifies that amendments to the HEA and other Federal laws and regulations may amend the terms of the MPN and cautions that “[d]epending on the effective date of the amendment, amendments to the [HEA or other federal laws and regulations] may modify or remove a benefit that existed at the time that you signed this MPN.” MPN at 6. Therefore, by signing the MPN, the borrower acknowledges the possibility that the terms of the agreement between themselves and the Department can be changed and that currently offered benefits may not be available in the future.

\7\ Master Promissory Note (MPN) Direct Subsidized Loans and Direct Unsubsidized Loans William D. Ford Federal Direct Loan Program, OMB No. 1845-0007 (retrieved Oct. 22, 2025), available at https://studentaid.gov/mpn/subunsub/preview.

The Department rejects the contention that this rule is barred by promissory estoppel. The doctrine of promissory estoppel is commonly understood to be inapplicable in disputes between private parties and the Federal Government. Michael J. Cole, Don't “Estop” Me Now: Estoppel, Government Contract Law, and Sovereign Immunity if Congress Retroactively Repeals Public Service Loan Forgiveness, 26.1 Lewis and Clark L. Rev. 154, 169 (2022) (citing Hubbs v. United States, 20 Cl. Ct. 423, 427-28 (1990), aff'd, 925 F.2d 1480 (Fed. Cir. 1991); Eliel v. United States, 18 Cl. Ct. 461, 469 (1989), aff'd, 909 F.2d 1495 (Fed. Cir. 1990); Schwartz v. United States, 16 Cl. Ct. 182, 185 (1989); Ralph C. Nash & John Cibinic, Promissory Estoppel: A Theory Without a Home in Government Contracts, 3 THE NASH & CIBINIC REP. ] 52 (July 1989)). Breach of contract disputes involving the Federal Government are governed by the Tucker Act (28 U.S.C. 1491(a)(1)) and Contract Disputes Act (41 U.S.C. 7101-7109), neither of which allow the private parties to obtain relief

when they are harmed by the Federal Government's promises.

Even if promissory estoppel was applicable to the Department, the required elements for a promissory estoppel claim could not be satisfied by a borrower whose employer loses its qualifying employer status as a result of this rule. The doctrine of promissory estoppel is rooted in detrimental reliance and requires proof that there was a promise or representation made, that the promise or representation was relied upon by the party asserting the estoppel in such a manner as to change his position for the worse, and that the promise's reliance was reasonable and should have been reasonably expected by the promisor. See L. Mathematics & Tech., Inc. v. United States, 779 F.2d 675, 678 (Fed. Cir. 1985). Here, the borrower would fail to satisfy the required elements for a promissory estoppel claim because they expressly acknowledged and agreed to the possibility of changes to benefits that existed when they signed the MPN. The MPN disclaims the idea that the terms and conditions of a Federal student loan are unalterable, meaning that any reliance interest is not reasonable. Furthermore, such a borrower would struggle to demonstrate that they were harmed as a result of this reliance, as the borrower would still have received a measurable benefit as a result of working for the formerly-qualifying employer, as all qualifying payments made by the borrower before the date of the organization's loss of qualifying employer status will continue to be counted as such, meaning that the borrower will have made progress toward loan forgiveness through PSLF as a result of their employment.