The U.S. Department of Education has finalized new regulations governing the Public Service Loan Forgiveness (PSLF) program that will disqualify borrowers who work in nonprofit facilities the department deems to have “a substantial illegal purpose.” The rule specifies that this includes facilities that provide gender-affirming care for minors, aid or abet violations of federal immigration laws, or engage in federally defined discrimination. This policy could jeopardize loan forgiveness for physicians serving in nonprofit hospitals and health systems across California.

CMA warns of impact on workforce and access to care

PSLF allows physicians to have their federal student loan debt forgiven after making 10 years of qualifying payments while working in nonprofit settings. In a comment letter submitted earlier this year, the California Medical Association (CMA) urged the department to maintain the existing PSLF eligibility rules and warned that restricting forgiveness for physicians in nonprofit health care settings would undermine recruitment and retention efforts—particularly in rural and medically underserved communities already facing physician shortages.

“PSLF has been a lifeline for physicians who choose careers in nonprofit and safety-net settings,” said CMA President René Bravo, M.D. “Limiting eligibility based on the types of medically necessary care a facility provides will harm patients and communities that already struggle to access care.”

Rule could extend to facilities serving undocumented patients

The final rule, effective July 1, 2026, allows the Department of Education to determine ineligibility based on whether a nonprofit facility is found to have aided or abetted violations of immigration or civil rights law, supported terrorism, or provided gender-affirming care. Department officials estimate that “fewer than 10 employers” will be affected each year, but CMA is concerned the rule’s broad scope could endanger thousands of physicians’ PSLF eligibility.

In addition to facilities that provide gender-affirming care for minors, the rule could also affect providers who refuse to cooperate with federal immigration enforcement activities or who treat patients regardless of documentation status. CMA has long opposed the use of health care data or patient interactions for immigration enforcement purposes, emphasizing that patients must be able to seek care without fear.

“Patients must be able to seek medical care without fear that their personal information will be used against them,” said Dr. Bravo. “Policies that conflate health care with immigration enforcement undermine trust in the medical system and put entire communities at risk.”

PSLF is critical to addressing physician shortages

CMA emphasized that the PSLF program is vital to sustaining California’s physician workforce. According to the Association of American Medical Colleges, more than 55% of medical school graduates plan to pursue Public Service Loan Forgiveness. With the average medical student graduating with more than $200,000 in debt and a projected nationwide shortage of up to 86,000 physicians by 2036, PSLF remains an essential tool for attracting physicians to underserved communities and ensuring access to care.

CMA continues to call on the Department of Education to preserve PSLF eligibility for all physicians serving patients in nonprofit facilities, regardless of the types of care those facilities provide.

California files legal challenge

California Attorney General Rob Bonta was joined by more than 20 state attorneys general in filing a lawsuit challenging the new PSLF rule from the Department of Education. 

For More Information

• CMA Letter to the Department of Education
• Final Rule
• Final Rule Fact Sheet