The Department of Education just finished negotiating rulemaking sessions around proposed new rules for Public Service Loan Forgiveness (PSLF), and the results leave a lot of question marks. But on top of that, much bigger changes to all federal student aid are coming soon.
Now, more than ever, borrower voices need to be involved in these processes. They feel complex, overwhelming, and most borrowers may even question whether or not some of the rules will impact them, but showing the Department of Education that borrowers are watching along and standing up for the protections they need matters.
One important feature of Negotiated Rulemaking is the requirement that the Department open the floor for public comment. This happens at multiple points, like when rules are proposed, when negotiators are being nominated, and during the negotiations themselves. This means there are multiple opportunities to make borrower voices heard!
Read our blog post “Understanding Negotiated Rulemaking: A Complete Guide for Beginners” here if you want to learn more about the process overall, and when public comments will be welcomed. Keep your eyes peeled for additional resources on crafting public comments, both written and verbal, from MDC. If you ever consider giving a comment and want some support or just a hype squad, just reach out to our NC SDRC team by emailing Sabrina McGee, [email protected]
Why This Matters
The student loan system is already in chaos. Millions of borrowers are stuck in forbearance because of legal challenges to the SAVE repayment plan, and people are confused about what options they actually have. These new changes will only add more uncertainty and complexity to a system that’s already falling apart.
The end result is that borrowers will have fewer affordable repayment options and fewer clear paths to loan forgiveness. This affects entire families—not just individual borrowers—since Parent PLUS loans mean multiple generations can be carrying student debt at once. When people can’t manage their student loans, they can’t buy houses, start families, or take lower-paying public service jobs that serve their communities. This impact is community-wide, and will change whether people can achieve basic financial milestones and whether our economy can function when an entire generation is drowning in debt.
Read on if you want to understand more about exactly what happened, and what’s coming.
What Just Happened with PSLF
The Background: PSLF was created by Congress in 2007 to help people pursue public service careers. If you work for a qualifying nonprofit or government employer and make 120 payments (10 years), your remaining federal student loans get forgiven. Over one million people have received this forgiveness.
The Problem: In March, President Trump signed an executive order telling the Department of Education to exclude employers who engage in “substantial illegal activity” from PSLF. This meant the start of the negotiated rulemaking sessions we mentioned above.
How This Could Be Weaponized
The real danger isn’t in what the proposed language says, but in how broadly it can be interpreted and who gets to make those decisions. The Secretary of Education, a political appointee, would have the power to declare any organization “illegal” for PSLF purposes, even if they’re following all existing laws.
Here’s how the seemingly innocent language could be used as a weapon against legitimate organizations:
“Illegal immigration activities” sounds like it targets human trafficking, but it could easily be used against organizations that help immigrants navigate the court system, hospitals that provide emergency care regardless of immigration status, or any city, county, or state that doesn’t fully cooperate with federal immigration enforcement. Sanctuary cities—which are perfectly legal under current law—could be excluded entirely.
“Gender-affirming treatments for transgender youth” could target not just medical providers, but any organization that provides mental health counseling, social services, or even basic support to transgender young people. This could include mainstream hospitals, university counseling centers, and nonprofits that work with LGBTQ+ youth in any capacity.
“Patterns of illegal discrimination” is particularly dangerous because it could be turned against the very organizations fighting discrimination. Civil rights groups, diversity and inclusion programs, or organizations that provide services specifically designed to help underrepresented communities could be labeled as “discriminating” against others. Similar reasoning is being used in North Carolina right now to freeze more than $108 million in funding to Duke University and Duke Health based on the accusation that Duke engaged in racial discrimination in the form of affirmation action.
“Aiding and abetting violations of state laws” is the broadest of all. Since states have different laws, an organization doing perfectly legal work in one state could be deemed “illegal” for PSLF purposes if their activities conflict with laws in other states. For example, organizations providing reproductive health services, marijuana research, or advocacy for policies the current administration opposes could all be targeted.
So, What Happened in Negotiated Rulemaking?
From June 30-July 2, representatives from different groups tried to reach agreement on new rules. The process failed when just one negotiator—representing borrower advocates—cast the only dissenting vote. She was particularly concerned about protecting sanctuary cities and universities from exclusion.
The Department can now propose a rule that may be the same or very different from what was negotiated, and this will be open for public comment. The public and borrowers won’t know what will be in the end versions of the rule until it’s released and finalized.
The Much Bigger Changes Coming
This PSLF issue is actually just one small piece of massive changes to all federal student aid. On July 4, President Trump signed the “One Big Beautiful Bill Act” into law, which will reshape how student loans and financial aid work. This means that the Department of Education needs to convene new negotiated rulemaking sessions to determine how they will implement all these changes.
You can view the full details for the upcoming sessions on the Federal Register, HERE: https://www.federalregister.gov/documents/2025/07/25/2025-13998/public-hearing-negotiated-rulemaking-committees
What’s Changing for Student Loans (Fall 2025 negotiations):
- Graduate school PLUS loans will be eliminated and replaced with much lower borrowing limits
- Most income-driven repayment plans will disappear for new borrowers
- It will be harder to pause payments during financial hardship
- New borrowers will have fewer repayment options
What’s Changing for Financial Aid (Winter 2025-26 negotiations):
- New short-term “Workforce Pell Grants” for programs approved by state governors
- Students with scholarships covering their full costs won’t get Pell Grants anymore
- College programs with poor job outcomes could lose access to federal student loans entirely
- Stricter rules for which programs qualify for federal aid
What This Means for Borrowers
If you’re currently in repayment (or the SAVE forbearance) on your student loans: Your options for repayment plans will change, and soon. Depending on your current plan and loan types, you may need to take action to secure the most optimal outcomes. You can view our resource on your options moving forward, “Student Loan Payment Plan Changes: Your Complete Guide 2025.”
If you’re working toward PSLF: Keep making your payments and submitting your annual employment forms. Your progress so far is protected, but your employer could potentially be excluded in the future based on political decisions rather than legal violations.
If you’re a current student: If you have already done your research on repayment plans, the ones you’ve learned about may not exist when you graduate. Graduate school will become much more expensive with lower loan limits.
If you’re planning to attend college: Pell Grants may be harder to get, and some programs may lose access to federal student loans entirely.