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

<RULE> DEPARTMENT OF EDUCATION <CFR>34 CFR Part 685</CFR> <DEPDOC>[Docket ID ED-2025-OPE-0016]</DEPDOC> <RIN>RIN 1840-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> Final regulations. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Secretary establishes new regulations on the Public Service Loan Forgiveness (PSLF) program in the William D. Ford Federal Direct Loan (Direct Loan) program under 34 CFR 685.219 by adding or clarifying provisions to exclude employers that engage in specific enumerated illegal activities such that they have a substantial illegal purpose, including defining obligations and processes tied to making such a determination of an employer, clarifying that borrowers will receive full credit for work performed, until the effective date of the Secretary's determination that an employer is no longer a qualifying employer under the rule; and establishing methods for an employer to regain eligibility following a determination of ineligibility by the Secretary. These regulations ensure that taxpayer dollars are not misused by preventing PSLF benefits from going to individuals employed by organizations that have a substantial illegal purpose. The revisions strengthen accountability, enhance program integrity, and protect hardworking taxpayers from shouldering the cost of improper subsidies granted to employees of organizations that undermine national security and American values through criminal activity. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> These regulations are effective July 1, 2026. For the implementation dates of the regulatory provisions, see the Implementation Date of These Regulations in <E T="02">SUPPLEMENTARY INFORMATION</E> . </EFFDATE> <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">Executive Summary</HD> The Department of Education (Department) is committed to ensuring that taxpayer dollars are not used to support organizations engaged in unlawful activities. To uphold this principle, the Secretary will exclude organizations engaged in specific enumerated activities such that they have a substantial illegal purpose from being considered qualifying employers under the Public Service Loan Forgiveness (PSLF) program. The activities indicative of a substantial illegal purpose include aiding and abetting violations of Federal immigration laws, supporting terrorism or engaging in violence for the purpose of obstructing or influencing Federal Government policy, engaging in the chemical and surgical castration or mutilation of children in violation of Federal or state law, engaging in the trafficking of children to another State for purposes of emancipation from their lawful parents in violation of Federal or State law, engaging in a pattern of aiding and abetting illegal discrimination, and engaging in a pattern of violating State laws. This action aligns with President Trump's Executive Order <E T="03">Restoring Public Service Loan Forgiveness,</E> Executive Order 14235 (Mar. 7, 2025) directing the Department to revise PSLF eligibility criteria to prevent Federal funds from subsidizing activities that undermine national security and American values. The final rule clarifies the definition of a qualifying employer, specifies activities constituting a substantial illegal purpose, outlines the impact on borrower eligibility, and ensures employers are notified and given an opportunity to respond before any adverse decision by the Secretary. These measures strengthen the integrity of the PSLF program and protect American taxpayers from supporting organizations engaged in illegal activities such that the organization has a substantial illegal purpose. <HD SOURCE="HD1">Purpose of This Regulatory Action</HD> <HD SOURCE="HD2">Summary of the Major Provisions of This Regulatory Action</HD> The final regulations— * Amend § 685.219(b) to modify the existing structure of the subsection into the 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 that a qualifying employer is no longer eligible as a qualifying employer for the PSLF program. Borrowers will receive full credit for work performed until the effective date of the Secretary's determination that an employer engaged in illegal activities such that it has a substantial illegal purpose under the rule. * Amend § 685.219(e) to require the Secretary to notify borrowers of a qualifying employer's status if the qualifying employer is at risk of becoming or becomes ineligible to participate in the PSLF program. * Amend § 685.219(g) to clarify that a borrower may not request reconsideration of a determination by the Secretary that resulted in the employer losing status as a qualifying employer because the employer has a substantial illegal purpose. * Add § 685.219(h) to establish that the Secretary determines by a preponderance of the evidence, and after notice and opportunity to respond, and consideration of materiality, that a qualifying employer has engaged in activities enumerated in paragraph (b)(30) on or after July 1, 2026, such that the employer has a substantial illegal purpose. Also, the Secretary will presume certain actions are conclusive evidence that the employer engaged in activities such that it has a substantial illegal purpose. * Add § 685.219(i) to establish that the Secretary will initiate the process for determining whether a qualifying employer engaged in activities such that it has 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). The Secretary made a minor technical change from the NPRM to remove an extraneous word “which” from (i)(1)(ii). Further, paragraph (i)(2) clarifies that the Secretary may consider organizations that share the same identification number or other unique identifier to be separate entities if the organization is operating separately and distinctly from another entity with the same identification number ( <E T="03">i.e.,</E> for the purpose of determining whether an employer sharing such identifier is eligible). * Add § 685.219(j) to establish that an employer that loses PSLF eligibility and desires to regain eligibility could regain qualifying employer status either (1) 10 years from the date the Secretary makes a determination under the process in subsection (i), or (2) after the Secretary approves a corrective action plan. * Add § 685.219(k) to require that, if an employer regains eligibility to participate in the PSLF program, the Secretary updates, within 30 days, the qualifying employer list. <HD SOURCE="HD1">Background</HD> The PSLF program was established by the College Cost Reduction and Access Act of 2007 (CCRAA), Public Law 110-84, 121 Stat. 84. In particular, the CCRAA amended section 455(m) of the Higher Education Act of 1965, as amended (HEA), to allow for cancellation of remaining loan balances for eligible Direct Loan borrowers after they made 120 monthly payments under a qualifying repayment plan while working in a qualifying public service. Following the enactment of the CCRAA, the Department promulgated PSLF regulations at 34 CFR 685.219, which became effective on July 1, 2009. <E T="03">See Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program,</E> 73 FR 63232 (Oct. 23, 2008). Since its original promulgation, 34 CFR 685.219 has been amended seven times. <E T="03">See</E> 74 FR 55972 (Oct. 29, 2009); 77 FR 76414 (Dec. 28, 2012); 80 FR 67204 (Oct. 30, 2015); 85 FR 49798 (Aug. 14, 2020); 87 FR 65904 (Nov. 1, 2022); 88 FR 43064 (July 6, 2023); 88 FR 43820 (July 10, 2023). Of these amendments, two amendments promulgated in 2020 and 2022, respectively, have substantively changed the criteria for qualifying employment for the purposes of participation in PSLF. In 2020, the definition of “public service organization” was substantively changed to allow employees of organizations engaged in religious activities (regardless of whether the borrower's duties included religious instruction, worship services, or any form of proselytizing) to be eligible for PSLF. This change was made in response to the United States Supreme Court decision in <E T="03">Trinity Lutheran Church of Columbia, Inc.</E> v. <E T="03">Comer,</E> 582 U.S. 449 (2017), and the United States Attorney General's October 7, 2017, Memorandum on Federal Law Protections for Religious Liberty, <E T="03">https://www.justice.gov/archives/opa/press-release/file/1001886/dl.</E> This memorandum was written pursuant to Executive Order 13798 on <E T="03">Promoting Free Speech and Religious Liberty</E> (May 4, 2017) and was intended to ensure that faith-based entities are not discriminated against due to their relig ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 269k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━