Trump's new plan could bar teachers, nurses from loan relief if employers flagged as 'illegal'

Teachers, nurses, social workers and other public employees could lose access to student loan forgiveness if their employers are deemed to have a “substantial illegal purpose,” under a new Trump administration proposal unveiled Friday. The Education Department said the changes target nonprofits and government bodies linked to activities involving immigrants and transgender youth, sparking fears that the program could be turned into a political weapon, according to Associated Press.

The overhaul of the Public Service Loan Forgiveness program, created in 2007 to draw graduates into lower-paying public service roles, would give the education secretary authority to decide which employers remain eligible. The proposal defines illegal activity to include “chemical castration” of children, a term used to describe hormone therapy or puberty blockers in gender-affirming care, along with illegal immigration and support for foreign terrorist organisations.

President Donald Trump ordered the changes in March, saying taxpayer money was flowing to “activist organisations” that threaten national security and do not serve the public. The Education Department predicts fewer than 10 organisations per year would be deemed ineligible, and insists the share of borrowers qualifying for forgiveness would not fall significantly. Still, it concedes that schools, universities, health providers, social workers and legal services are most at risk of being affected.

Eligibility could be withdrawn if a state or federal court rules against an employer or if the secretary independently concludes, on a “preponderance of evidence” standard, that the group engaged in illegal conduct. Once barred, an organisation would be excluded for 10 years or until it completes a corrective plan approved by the secretary. Workers would have to switch employers to continue accruing qualifying loan payments.

The Education Department says the proposal does not extend to groups engaged solely in advocacy, clarifying that organisations would not be banned for exercising First Amendment rights. But critics argue the rule is designed to punish political opponents.

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

The proposal follows months of rulemaking discussions with an expert panel that failed to reach consensus, allowing the department to draft its own plan. A 30-day public comment period is now open, and if finalised, the changes would take effect in July 2026.