William D. Ford Federal Direct Loan (Direct Loan) Program

DEPARTMENT OF EDUCATION <CFR>34 CFR Part 685</CFR> <DEPDOC>[Docket ID ED-2025-OPE-0016]</DEPDOC> <RIN>RIN 1801-AA28</RIN> <SUBJECT>William D. Ford Federal Direct Loan (Direct Loan) Program</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Office of Postsecondary Education, Department of Education. <HD SOURCE="HED">ACTION:</HD> Notice of proposed rulemaking. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Secretary proposes to amend the regulations on the Public Service Loan Forgiveness (PSLF) program under 34 CFR 685.219 to exclude employers that engage in activities that have a substantial illegal purpose. The proposed regulations would prevent taxpayer-funded PSLF benefits from being improperly provided to individuals who are employed by organizations that engage in activities that have a substantial illegal purpose. These proposed changes are intended to improve the administration of the PSLF program and provide protection for taxpayers. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> We must receive your comments on or before September 17, 2025. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Submit your comments through the Federal eRulemaking Portal at <E T="03">www.regulations.gov</E> . The Department will not accept comments submitted by fax or by email or comments submitted after the comment period closes. To ensure that the Department does not receive duplicate copies, please submit your comment only once. Additionally, please include the Docket ID at the top of your comments. Information on using <E T="03">Regulations.gov</E> , including instructions for submitting comments, is available on the site under “FAQ.” If you require an accommodation or cannot otherwise submit your comments via <E T="03">Regulations.gov</E> , please contact <E T="03">regulationshelpdesk@gsa.gov</E> or by phone at 1-866-498-2945. If you are deaf, hard of hearing, or have a speech disability and wish to access telecommunications relay services, please dial 7-1-1. <E T="03">Privacy Note:</E> The Department's policy is to make all comments received from members of the public available for public viewing in their entirety on the Federal eRulemaking at <E T="03">www.regulations.gov</E> . Therefore, commenters should include in their comments only information that they wish to make publicly available. Additionally, commenters should not include in their comments any personally identifiable information (PII) in comments about other individuals. For example, if your comment describes an experience of someone other than yourself, please do not identify that individual or include any personal information that identifies that individual. The Department reserves the right to redact a portion of a comment or the entire comment at any time if any PII about other individuals is included. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Tamy Abernathy, Office of Postsecondary Education, 400 Maryland Ave. SW, Washington, DC 20202. Telephone: (202) 987-0385. Email: <E T="03">Tamy.Abernathy@ed.gov</E> . </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Executive Summary</HD> The Department has a broad interest in ensuring that its programs do not contribute to or help support individuals or organizations that engage in unlawful activity. To prevent taxpayer-funded PSLF benefits from being improperly provided to individuals who are employed by organizations that are engaged in activities that are unlawful, the Secretary proposes to exclude any organization that engages in activities that have a substantial illegal purpose from being a qualifying employer for the purposes of the PSLF program. The proposed rule would clarify the definition of a qualifying employer, define activities that have a substantial illegal purpose, address the impact on borrower eligibility, and ensure employers are given notice and the opportunity to respond to an adverse finding. A brief summary of these proposed regulations is available at <E T="03">https://www.regulations.gov/document/ED-2025-OPE-0016-0001</E> . <HD SOURCE="HD1">II. Summary of the Major Provisions of This Regulatory Action</HD> These proposed regulations would: * Amend § 685.219(b) to modify the existing structure of the subsection into regulatory paragraph structure. * Amend § 685.219(b) to add definitions for: aiding or abetting, chemical castration or mutilation, child or children, foreign terrorist organizations, illegal discrimination, other Federal Immigration laws, substantial illegal purpose, surgical castration or mutilation, terrorism, trafficking, violating State law, and violence for the purpose of obstructing or influencing Federal Government policy. * Amend § 685.219(c) to establish that on or after July 1, 2026, no payment made by a borrower shall be credited as a qualifying payment for PSLF for any month subsequent to a determination that a qualifying employer engages in activities that have a substantial illegal purpose. * Amend § 685.219(e) to require the Secretary notify borrowers employed by a qualifying employer of the employer's status if the employer is at risk of becoming or becomes ineligible for the PSLF Program. * Amend § 685.219(g) to clarify that a borrower may not request reconsideration of a final determination by the Secretary that the employer lost status as a qualifying employer. * Add § 685.219(h) to establish that the Secretary would determine by the preponderance of the evidence, and after notice and opportunity to respond, that a qualifying employer has engaged on or after July 1, 2026, in activities that have a substantial illegal purpose by considering the materiality of any illegal activities or actions. Also, the Secretary will deem certain actions as conclusive evidence that the employer engaged in activities that have a substantial illegal purpose. * Add § 685.219(i) to establish that the Secretary will determine that a qualifying employer engaged in activities that have a substantial illegal purpose when (1) the Secretary receives an application in which the employer fails to certify that it did not participate in activities that have a substantial illegal purpose, or (2) the Secretary otherwise determines that the qualifying employer engaged in such activities under the standard set forth in § 685.219(h). * Add § 685.219(j) to establish that an employer that loses PSLF eligibility could regain qualifying employer status after (1) 10 years from the date the Secretary determines the employer engaged in activities that have a substantial illegal purpose, or (2) after the Secretary approves a corrective action plan. * Add § 685.219(k) to require that if an employer regains eligibility, the Secretary will update, within 30 days, the qualifying employer list. <E T="03">Cost and Benefits:</E> As further detailed in the Regulatory Impact Analysis (RIA), the proposed changes would have meaningful implications for borrowers, taxpayers, and the Department. The regulatory changes outlined in this rule are designed to preserve the integrity of the PSLF program by ensuring that only borrowers employed by organizations engaged in lawful public service remain eligible for forgiveness. By excluding employers that engage in activities with a substantial illegal purpose, the rule aims to better align PSLF eligibility with the program's statutory intent—to reward public service. Furthermore, it ensures that the Department is not indirectly subsidizing employers who are engaging in activities that have a substantial illegal purpose. For borrowers, the proposed rule may alter eligibility for PSLF if they are employed by organizations that no longer qualify under the revised criteria. In cases where an employer is deemed to have engaged in activities that breach federal or state law or established public policy, affected borrowers would no longer receive credit toward loan forgiveness for months worked after the effective date of ineligibility. While this may delay or prevent forgiveness for a subset of borrowers, the overall design of the regulations—including advance notice, transparency around determinations, and employer recertification pathways—helps mitigate unexpected harm. These borrowers would retain the ability to pursue PSLF through eligible employment elsewhere, thereby preserving the program's incentive structure. For taxpayers, the proposed rule reduces the risk of inappropriate government expenditures by ensuring that loan forgiveness is granted only in circumstances where individuals are engaged in public service. Employers that engage in unlawful activity are not serving the public interest because their actions harm, rather than help, the public good. By limiting PSLF eligibility to borrowers employed by organizations that do not engage in unlawful conduct, the rule reinforces appropriate stewardship of federal funds. While the exact budgetary impact will depend on the number and type of employers determined to fall outside the clarified definition, the proposal is expected to reduce PSLF-related discharges in cases where forgiveness would otherwise have gone to borrowers employed at organizations acting illegally. For the Department, the rule introduces new administrative responsibilities. These include reviewing court judgments and plea agreements for evidence of employer misconduct, issuing determinations, notifying borrowers of status changes, and overseeing corrective action plans. While these tasks will require the investment of staff time and system resources, the use of existing standards—such as definitions grounded in federal law and doctrines adopted by other agencies—will allow the Department to administer the regulations with efficiency and consistency. The rule also codifies a clear evidentiary framework, such as relying on court judgments or plea agreements, which limits the need for n ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 162k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━