Student Loan Forgiveness Through PSLF is in Jeopardy for These Borrowers

Borrowers pursuing student loan forgiveness based on their public service work have been on edge all year.And while there’s been a bit of good news during the last month, there also is an enormous amount of uncertainty.The Public Service Loan Forgiveness (PSLF) program might be the most popular federal debt relief option available, offering borrowers a complete discharge of their federal student loans after the equivalent of 10 years of qualifying payments while working in eligible nonprofit or government service.PSLF has a checkered history, with approval rates stuck in the 1% to 2% range due to the program’s complexity and the government’s poor loan servicing and oversight practices.

But student loan forgiveness approvals through PSLF soared during the Biden administration following regulatory changes and a series of temporary waivers intended to rectify past errors and streamline the program going forward.As a result, well over a million borrowers have now benefited from the program.But the future of PSLF is uncertain.While new legislation proposed by congressional Republicans would largely keep the program intact, not everyone would be spared.

At the same time, the Department of Education is moving forward to change the rules governing PSLF, likely to implement an executive order signed by President Trump last spring to restrict eligibility for the student loan forgiveness program.Here’s where things stand, and who is most at risk for losing access to student loan forgiveness under the PSLF program.New doctors and dentists could effectively be cut off from PSLF Republican leaders in the House and the Senate have been pushing legislation that would dramatically reshape the federal student loan system, particularly with respect to income-driven repayment (IDR) plans.The legislation would repeal several existing IDR options, including Saving on a Valuable Education (SAVE), Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR).  But the good news is that both the House and Senate versions of the legislation would largely preserve student loan forgiveness under PSLF.

However, new doctors and dentists could effectively be cut off from PSLF if either of the current versions of the legislation becomes law due to a combination of separate provisions: First, both versions of the legislation would eliminate medical and dental residencies and internships from PSLF eligibility after the bill’s passage, even for borrowers who work for qualifying employers.Most doctors and dentists earn the lowest incomes during their residency periods, so their federal student loan payments can be relatively low while they make a significant dent in the 10 years of repayment required to receive student loan forgiveness under the PSLF program.In addition, the bill would restrict the availability of federal student aid for prospective doctors and dentists.Both versions of the legislation would eliminate the Graduate PLUS loan program, which has allowed graduate and professional students to finance the cost of their advanced degree up to the total cost of attendance.

Without this option, and with federal Stafford loans capped, many borrowers would need to rely on private student loans.Private student loans are ineligible for student loan forgiveness (including for PSLF) and often have stricter repayment terms and fewer consumer protections.This could cause some prospective doctors and dentists to decide to forego higher education altogether.Finally, the House version of the legislation would eliminate a cap on payments under IDR plans that are intended to prevent monthly payments from skyrocketing if a borrower’s income increases.  Taken together, these changes, if they are enacted, could effectively prevent many new doctors and dentists from accessing student loan forgiveness through PSLF.

With their residency and internship periods no longer eligible for PSLF, these borrowers would be repaying a much smaller federal student loan balance (due to the elimination of Graduate PLUS loans) during their much higher earning periods, with no cap on their payments.As a result, many doctors and dentists would wind up repaying their loans in full.  While this may seem like a good deal for American taxpayers, the reality is more complex.The American Medical Association has warned that the bill’s provisions would dissuade many prospective medical students from pursuing a career as a doctor, thus worsening existing doctor shortages, particularly in rural and other high-need areas.“The combined effect of the elimination of GRAD PLUS loans along with a borrowing cap for Direct Unsubsidized Loans that is $62,000 below the mean amount needed to graduate from medical school will severely limit the number of individuals that can afford a medical degree and likely exacerbate the looming shortage of 86,000 physicians,” wrote the American Medical Association (AMA) in a letter to Republican house leaders in May.

Parent PLUS borrowers could become ineligible for PSLF The legislation being pushed by congressional Republicans would not technically eliminate PSLF eligibility for Parent PLUS borrowers.But it would effectively make it impossible for these borrowers to receive student loan forgiveness under the program.The bills do this by cutting off most Parent PLUS borrowers from any IDR plan, which is a required component of PSLF for most people.While Parent PLUS loans are generally ineligible for IDR, they can become eligible for the ICR plan by consolidating their loans into a Direct consolidation loan.

And ICR is a qualifying repayment plan for PSLF.  The Republican-led legislation would grandfather in Parent PLUS borrowers who have already consolidated their loans and are enrolled in ICR; these borrowers would be automatically moved into the IBR plan, which may actually be more affordable than ICR in many cases.  But all other Parent PLUS loans would be ineligible for any IDR plan, including the Repayment Assistance Plan (RAP), a new IDR option that the bills would create.Without being able to enroll in any IDR plan, Parent PLUS borrowers would not be able to pursue PSLF.  Student loan forgiveness eligibility under PSLF could be questioned for certain organizations In March, President Trump signed an executive order to restrict PSLF eligibility for organizations engaged in certain activities that the administration considers to be potentially “illegal.” The PSLF program “may push students into organizations that hide under the umbrella of a non-profit designation and degrade our national interest, thus requiring additional Federal funding to correct the negative societal effects caused by these organizations’ federally subsidized wrongdoing,” said Trump in the order.“It is the policy of my Administration that individuals employed by organizations whose activities have a substantial illegal purpose shall not be eligible for public service loan forgiveness.” The order goes on to define certain categories of activities that could result in an organization’s loss of student loan forgiveness eligibility.These include “aiding or abetting” violations of federal immigration laws; “child abuse,” which the order specifically defines as facilitating the availability of gender-affirming healthcare to transgender youth; and “engaging in a pattern of aiding and abetting illegal discrimination,” which could be interpreted to include any diversity, equity, and inclusion (DEI) initiatives.  The executive order has not had any immediate impact, as it directs the Department of Education to draft new PSLF regulations implementing the order’s directives.

The department has initiated the negotiated rulemaking process to do that, but it may take several more months before borrowers can really know what the new rules may look like.Critics of the proposal argue that the order is vague and overbroad, and could lead to the mass denial of student loan forgiveness under PSLF for borrowers employed by any organization whose activities are opposed by the Trump administration.This could include immigrant rights organizations, hospitals that provide healthcare to transgender children, and universities and state or local governments that have DEI initiatives.  “Efforts to limit access to or weaponize PSLF will threaten critical public service fields and harm our most vulnerable communities,” said a coalition of nearly 200 organizations in a letter to the Department of Education last month.“[We are] incredibly troubled to see President Trump’s executive order aimed at limiting access to PSLF for public service workers employed at organizations engaging in work that is not in line with President Trump’s agenda.” Some legal observers have indicated that any attempt to restrict student loan forgiveness under PSLF based on an organization’s activities would not be allowable under the statute governing the program, as only Congress can make wholesale changes to PSLF eligibility rules.

Critics have also suggested that effectively punishing qualifying organizations for their otherwise-legal speech or activities could run afoul of the U.S.Constitution.As a result, there may be legal challenges once the new regulations are finalized by the Department of Education, which could happen later this year or early next year.But legal battles may not necessarily yield fast or conclusive results.

And borrowers pursuing PSLF who work for organizations that could be covered by President Trump’s order should be aware that they may be in for months, or possibly years, of student loan forgiveness uncertainty.