Changes tied to President Donald Trump’s One Big Beautiful Bill Act take effect July 1, 2026, altering which repayment plans and borrower groups qualify for Public Service Loan Forgiveness.
A set of rule changes to the federal Public Service Loan Forgiveness (PSLF) program that took effect July 1, 2026, has narrowed which repayment plans and borrower types qualify for forgiveness, potentially leaving some parent borrowers unable to access PSLF. The changes stem from provisions in President Donald Trump’s One Big Beautiful Bill Act (OBBBA) and affect repayment-plan eligibility, Parent PLUS borrowers’ pathways, and the standards for qualifying employers.
What changed — the three key updates
1) A new Tiered Standard repayment plan does not count toward PSLF
The OBBBA established a Tiered Standard Plan with fixed payments structured by total debt level. Time spent in the Tiered Standard Plan will not count toward the 120 qualifying payments required for PSLF, according to Scott Buchanan, executive director of the Student Loan Servicing Alliance.
For loans disbursed on or after July 1, 2026, the Tiered Standard Plan is the default repayment schedule unless borrowers actively choose another option. Rich Williams, former deputy assistant secretary at the Education Department, warned that new borrowers who don’t select a qualifying plan “get placed there automatically, quietly earning zero PSLF credit.”
New borrowers who can qualify for PSLF must enroll in the Repayment Assistance Plan (RAP), the Education Department’s redesigned income-driven repayment (IDR) program. RAP sets monthly payments as a percentage of income — typically 1% to 10% — and is the only IDR that counts for new borrowers aiming at PSLF eligibility.
2) Many Parent PLUS borrowers are effectively excluded from PSLF
The OBBBA removed Parent PLUS loans from access to income-driven repayment and therefore from a pathway to PSLF for loans taken out after July 1, 2026. Williams said, “Parent PLUS loans no longer have a path into income-driven repayment or PSLF.”
Parent borrowers who took out loans after the effective date now qualify only for the Tiered Standard Repayment Plan, which does not accumulate PSLF credit.
Existing Parent PLUS borrowers briefly had an opportunity to consolidate into Direct loans — the loan type that can qualify for IDR and PSLF — during a limited consolidation window. Those who did not consolidate in that window have lost access to IDR plans and, as a result, PSLF eligibility, per experts cited in the source.
3) Employer eligibility language tied to unlawful activity was struck down by courts
Two federal judges blocked the Trump administration’s proposed change to the definition of a “qualifying employer” under PSLF that would have allowed excluding organizations that “engage in unlawful activities.” Opponents argued that the phrasing was vague and could be used to disqualify nonprofits arbitrarily.
Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program (EDCAP), said the administration could appeal, but “they have not said anything since the rule was struck down,” and any successful appeal is not guaranteed.
The Education Department told borrowers it is updating the PSLF form to comply with the court order, adding that language about employers certifying they have not engaged in illegal activities “will have no effect.”
Why It Matters
PSLF provides cancellation of federal student loans after 120 qualifying payments (10 years) for borrowers employed by qualifying government or nonprofit organizations. The program was created in 2007 and, according to a 2022 Protect Borrowers estimate cited in the source, more than 9 million public-service workers could be eligible — though only a small fraction have received relief historically.
The combination of a non-qualifying default repayment plan for new borrowers and the loss of IDR access for Parent PLUS loans narrows the pathway to PSLF for sizable borrower groups.
Existing borrowers pursuing PSLF still have more qualifying IDR choices (such as Income-Based Repayment) and should compare plans to select the option that preserves PSLF credit, Nancy Nierman advised. She stressed that PSLF remains a 10-year path to forgiveness regardless of the IDR plan a borrower is enrolled in.
What borrowers should do now
- If you work in government or at a nonprofit and intend to pursue PSLF, submit the employer certification form annually and keep records of confirmed qualifying payments. The Education Department’s updated PSLF form is being adjusted to reflect the court ruling.
- New borrowers should not rely on default enrollment. Because the Tiered Standard Plan is the default for loans issued on or after July 1, 2026, anyone aiming for PSLF must actively select RAP or another qualifying IDR plan described by the Education Department.
- Parent PLUS borrowers who had loans before the July 1 effective date and consolidated during the limited window may have preserved PSLF access; those who did not consolidate have lost IDR and PSLF eligibility under the changes described.
Key Quotes
Scott Buchanan, Student Loan Servicing Alliance: Time in the Tiered Standard Plan “will not count toward your 120 required PSLF payments.”
Rich Williams, former deputy assistant secretary, Education Department: “New borrowers who don’t actively pick a plan get placed there automatically, quietly earning zero PSLF credit.”
Nancy Nierman, EDCAP: “It’s a 10-year path to forgiveness regardless of which plan you are enrolled in.”
Bottom Line for Traders
These rule changes alter the universe of borrowers who can accumulate PSLF credit: new borrowers face a non-qualifying default repayment plan unless they opt into RAP; many Parent PLUS borrowers are shut out unless they consolidated earlier; and employer-eligibility changes were curtailed by the courts. The practical effect is narrower PSLF eligibility for some borrower groups and a stronger need for active plan selection and annual employer certification to preserve qualifying payments.
