The Trump administration is preparing an overhaul of the Public Service Loan Forgiveness program that would make loan relief off-limits to public-sector and nonprofit workers whose employers are deemed to engage in “illegal activities.” A draft rule circulated by the Education Department would let the secretary of education disqualify any organization found to aid violations of federal immigration law, support a foreign terrorist group or provide certain medical care to transgender youth, among other criteria. Created in 2007, PSLF cancels remaining federal student debt for government employees, teachers, nurses and other nonprofit staff after 10 years of qualifying payments. More than 1 million borrowers have already had balances erased, and another 2 million are working toward forgiveness, according to December department data. Advocates say the proposed restrictions could abruptly end eligibility for workers at entire hospital systems, school districts or city governments if even a single unit’s activities fall under the new definitions. President Trump ordered the changes in March, arguing the program had “misdirected tax dollars into activist organizations.” The draft rule would also require employers to certify annually that they are not involved in prohibited conduct, raising the risk that paperwork errors alone could jeopardize borrowers’ progress. If finalized after a public comment period, the regulation would take effect in July 2026. Only one member of a 10-person advisory panel formally opposed the measure, but several negotiators and outside experts warned it leaves broad discretionary power to the education secretary. “This is politically motivated and perhaps will be used as a tool for punishment,” said Betsy Mayotte, president of the Institute of Student Loan Advisors. Emeka Oguh, chief executive of student-loan benefits firm PeopleJoy, cautioned that sweeping disqualifications could worsen shortages of doctors and nurses. The department said it must ensure taxpayers are not subsidizing unlawful conduct.