Trump administration seeks to limit student loan forgiveness for workers tied to 'illegal immigrants'

Teachers, nurses, social workers, and other public employees could lose access to student loan forgiveness if their employers are found engaged in activities labeled as “illegal,” under a federal proposal released by the Trump administration on Friday.

The Education Department’s plan would allow the secretary of education to decide whether a nonprofit or government entity is excluded from the Public Service Loan Forgiveness program. The proposal cites 'illegal activities' such as supporting immigrants, providing gender-affirming care, or aiding groups tied to terrorism as grounds for disqualification.

The loan forgiveness program, created in 2007, cancels federal student debt for government and nonprofit workers after 10 years of payments. The department said fewer than 10 organizations a year would likely be barred, adding that most borrowers would still remain eligible.

Opponents argue the move politicizes student loan relief. Kristin McGuire, CEO of Young Invincibles, said, “By using a distorted and overly broad definition of ‘illegal activities,’ the Trump administration is exploiting the student loan system to attack political opponents.”

The proposal would take effect in July 2026 if finalized. Workers employed at excluded organizations would no longer have their loan payments count toward forgiveness and would need to switch employers to stay on track.

The department acknowledged schools, universities, health care providers, social service agencies, and legal organizations could be among the most affected. It noted that in 27 states where gender-affirming care is banned, organizations providing such services could be disqualified.

The rule would also permit the secretary to act without a court ruling, using a “preponderance of the evidence” standard. A ban would last ten years unless an employer completes a corrective action plan.

(With inputs from AP)