The Education Department released its final rule on Public Service Loan Forgiveness on Oct. 30, 2025, with an effective date of Nov. 5, 2025. The rule amends the definition of qualifying employer to exclude certain nonprofit organizations.

On Nov. 4, 2025, SDStudent Defense and Public Citizen filed a lawsuit on behalf of the Robert F. Kennedy Center for Justice and Human Rights, the American Immigration Council, The Door, and the League of United Latin American Citizens Institute challenging the new PSLF rule.

The Public Service Loan Forgiveness program was created in 2007 to encourage people to work in public service by forgiving federal student loans after 10 years of qualifying employment and 120 qualifying payments. PSLF applies to borrowers working for government organizations and 501(c)(3) nonprofit organizations.

The new rule changes which nonprofits count as qualifying employers by excluding organizations that engage in what the administration characterizes as political advocacy or partisan activities. This targets organizations focused on civil rights, immigration advocacy, voting rights, and other causes the Trump administration opposes.

The rule affects thousands of borrowers who took jobs at advocacy nonprofits specifically because PSLF made the lower salaries financially viable. These borrowers had been making qualifying payments for years expecting loan forgiveness after 10 years of service.

The Education Department said the rule restores PSLF to its intended purpose of benefitting Americans working in public service. Critics argue the rule politicizes loan forgiveness by excluding organizations based on ideological disagreement with their missions.

Previous Education Department guidance had treated all 501(c)(3) organizations as qualifying employers without distinguishing between service-oriented and advocacy-oriented nonprofits. The new rule creates this distinction for the first time.