The U.S. Department of Education took a key step on Thursday to initiate a process that could result in major changes to several federal student loan forgiveness and repayment programs.
The department issued a formal notice of its intent to initiate negotiated rulemaking, a process under federal law that allows officials to update or change regulations governing various federal student loan programs. According to the notice, the department will focus specifically on Public Service Loan Forgiveness, Income-Contingent Repayment, and Pay As You Earn – popular programs that offer student loan forgiveness to borrowers after years in repayment.
“This process will focus on how the Department can rightsize Title IV regulations that have driven up the cost of college and hindered innovation,” said Acting Under Secretary James Bergeron in a statement on Thursday. “Not only will this rulemaking serve as an opportunity to identify and cut unnecessary red tape, but it will allow key stakeholders to offer suggestions to streamline and improve federal student aid programs.”
Here’s what borrowers should know about the Department of Education’s rulemaking notice, and what it may mean for critical student loan forgiveness and repayment programs.
Department of Education Initiates Process To Change Rules For Student Loan Forgiveness And Repayment
Negotiated rulemaking is a complicated process mandated by federal law that requires the Department of Education to take a series of steps to update or change federal regulations. The first step in the process is to issue a formal notice to commence negotiated rulemaking, which is what the department did on Thursday. Department officials will then form a committee of stakeholders and hold a series of public hearings to discuss proposed changes. The process culminates in the publication of final regulations.
“The U.S. Department of Education’s Office of Postsecondary Education today announced its intention to commence negotiated rulemaking on various programs authorized under Title IV of the Higher Education Act of 1965,” said the department’s statement on Thursday. The department indicated it is seeking “ideas to improve the Public Service Loan Forgiveness Program, the Pay As You Earn (PAYE) Repayment plan, and the Income-Contingent Repayment (ICR) plan.”
The department’s formal notice of intent to commence negotiated rulemaking confirmed that the focus would be on PSLF, PAYE, and ICR. The department seeks “public feedback, especially addressing topics which may include Public Service Loan Forgiveness (PSLF), Pay As You Earn (PAYE), IncomeContingent Repayment (ICR), or other topics that would streamline current federal student financial assistance programs,” reads the notice.
How Key Student Loan Forgiveness Under PSLF Could Be Targeted Through Rulemaking
The PSLF program offers student loan forgiveness to borrowers who make payments on their loans for at least 10 years while maintaining employment at qualifying nonprofit or government organizations. The department indicated in its notice of intent to commence negotiated rulemaking that it is looking at “Refining definitions of a qualifying employer for the purposes of determining eligibility for the Public Service Loan Forgiveness program.”
This appears to be a direct reference to President Donald Trump’s executive order issued in March to limit student loan forgiveness eligibility under the PSLF program. The order instructed the Department of Education to “propose revisions” to the regulations governing PSLF to exclude from the definition of “qualifying employment” organizations that “engage in activities that have a substantial illegal purpose.” The order suggests that such organizations could include those that facilitate the violation of federal immigration laws, advocate for or provide gender affirming healthcare for transgender youth, or engage in “illegal discrimination” (which could be a reference to DEI initiatives).
Legal observers and student loan borrower advocacy groups have argued that the somewhat vague definition of “illegal purpose” could effectively ensnare nearly any organization that engages in activities the Trump administration opposes. Such groups have further argued that neither President Trump nor the Department of Education have any authority to narrow the definition of a qualifying employer for PSLF without congressional authorization, and that penalizing organizations based on their mission or activities could run afoul of the U.S. constitution.
“This action is unconstitutional and illegal,” said Kristin McGuire, executive director of Young Invincibles in a statement last month. “Trump can not make major modifications to a program that was written into law by Congress.” McGuire accused Trump of “abusing his power to punish borrowers for ideological reasons and blocking necessary relief that has been mandated for all 501c3 employees by law since 2007,” which is when PSLF was first created.
How Key Student Loan Forgiveness Under ICR And PAYE Could Be Targeted Through Rulemaking
The Department of Education’s notice is less clear on how Trump administration officials may want to change the ICR and PAYE plans. All the notice says is that “proposed topics for negotiation would include” the ICR and PAYE plans. ICR and PAYE are two income-driven repayment plans that allow borrowers to make affordable payments tied to their income. Borrowers can receive student loan forgiveness of any remaining balance after 20 or 25 years in repayment under those plans.
However, as part of an ongoing legal challenge brought by a group of Republican-led states over the SAVE plan – another income-driven repayment program – the future of student loan forgiveness under ICR and PAYE has already been thrown into doubt. The 8th Circuit Court of appeals issued a ruling in February that questioned whether Congress intended for there to be loan forgiveness at the end of 20 or 25 years under PAYE and ICR, respectively, despite more than 30 years of regulations, loan contract language, and public assurances made to borrowers by loan servicers and the federal government. It is quite possible that the Department of Education will seek to end student loan forgiveness under these programs, citing the 8th Circuit’s recent decision as the rationale.
Income-Based Repayment, or IBR, is not currently subject to any legal challenge and was established separately by Congress. The department’s notice of intent to commence rulemaking does not reference IBR. Payments made under PAYE and ICR can count toward student loan forgiveness under IBR, so borrowers who wind up getting impacted by changes to program rules can potentially switch plans. However, payments could be more expensive under IBR, and not all borrowers would be eligible to change their repayment plan. And the Trump administration halted all processing for all four income-driven plans in the wake of the 8th Circuit’s recent ruling, leading to a new legal challenge.
What’s Next For Student Loan Forgiveness Rule Changes
The Department of Education’s issuance of the notice of intent to commence negotiated rulemaking is just the first step in what will be a lengthy process that will likely take more than a year. The next step is the creation of a rulemaking committee comprised of key stakeholders, which will then hold a series of public hearings.
“The Department will also host two public hearings – an in-person meeting on Tuesday, April 29, 2025 and a virtual hearing on Thursday, May 1, 2025,” said the department in its statement on Thursday.
Borrowers who are on track for student loan forgiveness through PSLF, ICR, or PAYE and are concerned about the Department of Education making adverse changes to program rules can submit formal comments through the Federal eRulemaking Portal at Regulations.gov. “The deadline for public comment is 30 days after publication in the Federal Register,” says the department’s statement.
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