The Trump administration proposed new rules earlier this month that could revoke the tax-exempt status of certain nonprofit private schools and educational institutions. If enacted, the regulatory updates could directly impact borrowers hoping to get their student loans forgiven through Public Service Loan Forgiveness (or PSLF), adding to a recent string of challenges that is threatening the popular student loan forgiveness program.

The proposed tax rules, released by the Treasury Department in early September, would allow the government to rescind or deny 501(c)(3) tax-exempt status to nonprofit private secondary schools, colleges, and universities whose policies, in the IRS’s determination, are racially discriminatory.

“Under President Trump, this Administration is standing up for America’s students by ensuring racial discrimination has no place in American education,” said Treasury Secretary Scott Bessent in a statement announcing the proposed rule earlier this month. “Schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature. Today’s Treasury and IRS proposed regulations establish a clear standard, and the institutions that continue to use discriminatory practices will no longer receive the benefits of federal tax-exempt status.”

But critics warned that the new tax rules, if enacted, could be weaponized against educational institutions that simply oppose the Trump administration’s policy priorities. And the rules could also be used to target nonprofit schools that employ student loan borrowers pursuing PSLF. That would essentially create a workaround for the administration to try to block student loan forgiveness under the program after separate rules targeting PSLF that the Education Department had proposed earlier this year were struck down by federal courts in June. Here’s the latest.

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