Loan Forgiveness Denied for Shady Bosses: Education's Tough Love
Published Date: 10/31/2025
Rule
Summary
Starting July 1, 2026, the government will stop loan forgiveness for people working at employers involved in serious illegal activities. If an employer is flagged, workers keep their credit until the decision date, and employers can fix issues to get back in the program. This change protects taxpayers and makes sure loan forgiveness only helps those working for honest organizations.
Analyzed Economic Effects
6 provisions identified: 3 benefits, 3 costs, 0 mixed.
Employers Doing Illegal Acts Lose PSLF
Starting July 1, 2026, employers that the Secretary determines engage in certain enumerated illegal activities such that they have a “substantial illegal purpose” will no longer count as qualifying employers for Public Service Loan Forgiveness (PSLF). If your employer is so determined, payments you make after the Secretary's determination date will not count toward the 120 qualifying payments needed for forgiveness.
You Keep Credit Until Determination Date
If your employer is later found to have a substantial illegal purpose, you will keep full PSLF credit for work you did up through the effective date of the Secretary's determination. Only months worked after the Secretary's determination date will not count for PSLF.
Employers Can Regain PSLF Eligibility
An employer that loses PSLF eligibility may regain qualifying-employer status either 10 years after the Secretary’s determination or sooner if the Secretary approves a corrective action plan. If an employer regains eligibility, the Department must update the qualifying-employer list within 30 days.
Borrowers Cannot Reconsider Employer Determinations
Under the final rule, a borrower may not request reconsideration of the Secretary's determination that caused an employer to lose qualifying-employer status because the employer has a substantial illegal purpose. That means you, as a borrower, cannot appeal that employer-focused determination through the borrower reconsideration process.
Evidence Standard and Presumptions for Employer Review
The Secretary will determine employer ineligibility by a preponderance of the evidence after notice and opportunity to respond, and will presume certain actions (for example, court judgments or plea agreements) are conclusive evidence of a substantial illegal purpose. The Department may rely on such judgments or plea agreements when deciding whether an employer is disqualified.
Department Must Notify Borrowers About Risk
The Department must notify borrowers if their qualifying employer is at risk of becoming, or becomes, ineligible for PSLF. You will receive notice so you know your employer’s status and can consider other employment if you want to preserve PSLF eligibility.
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Key Dates
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