Education Department expands PSLF authority to bar certain employers

WASHINGTON — The Education Department finalized new rules Thursday that expand its authority to remove certain nonprofits and public employers from the Public Service Loan Forgiveness program if their work is judged to have a "substantial illegal purpose," a change officials say will prevent taxpayer-funded loan cancellation from going to lawbreakers and critics warn could cut off forgiveness for teachers, doctors and other public workers.

Under the rule, the education secretary may exclude organizations that engage in activities the department lists as illegal, including human trafficking, supporting terrorist organizations, facilitating illegal immigration and what the rule describes as "chemical castration" of children — defined in department materials as use of hormone therapy or drugs that delay puberty, a form of gender-affirming care for transgender youth. The department said the new standard is necessary to protect borrowers and taxpayers; it estimates fewer than 10 employers would be barred per year.

The rule, finalized Thursday and scheduled to take effect in July, gives the secretary authority to act even without a court finding. Employers can be expelled if a state...