Proposed Changes to Public Service Loan Forgiveness Program, Take Action Now
Public Service Loan Forgiveness Program - Changes Proposed, Comment Period Open
Earlier this week the US Department of Education announced changes to the Public Service Loan Forgiveness (PSLF) Program, the program used by thousands of working nonprofit and government professionals, and leveraged by thousands more college students looking to enter the those fields.
What PSLF Does
Currently, the PSLF Program forgives the remaining balance on direct federal student loans after you have made 120 qualifying monthly payments, and have worked full-time for a government or nonprofit employer. If you jumped right into the nonprofit sector out of college and worked for ten years, making your monthly payments or the equivalent value of those monthly payments (e.g. you can pay annually, but has to equal 12 monthly payments) - your loan would be forgiven after ten (10) years.
What Could Change
Under the Department of Education's proposed new rules, some 501(c)3 nonprofits could become ineligible employers based on their mission focus areas. Specifically, it calls for the definition of eligible employer to exclude organizations who are seen as participating "...in activities that have a substantial illegal purpose."
The rule comes in response to President Trump's March 7 Executive Order focused on the PSLF Program and mirrors those priorities.
Specifically, it recommends making organizations engaged in the following types of work ineligible the participate in PSLF:
- aiding or abetting violations of 8 U.S.C. 1325 or other Federal immigration laws;
- supporting terrorism, including by facilitating funding to, or the operations of, cartels designated as Foreign Terrorist Organizations consistent with 8 U.S.C. 1189, or by engaging in violence for the purpose of obstructing or influencing Federal Government policy;
- engaging in the chemical and surgical castration or mutilation of children in violation of Federal or State law;
- engaging in the trafficking of children to states for purposes of emancipation from their lawful parents in violation of Federal or State law,
- engaging in a pattern of aiding and abetting illegal discrimination; or
- engaging in a pattern of violating State laws as defined in paragraph (34) of this subsection.
- [Paragraph 34] violating State law would mean a final, non- default judgment by a State court of: (i) trespassing; (ii) disorderly conduct; (iii) public nuisance; (iv) vandalism; or (v) obstruction of highways.
The full proposed rule has additional definitions and provides a section entitled "Reasons" for each proposed change. We cannot cover all of it in this newsletter, so we recommend reading the entire rule.
Employers (nonprofits) who are found to be in violation of this proposed rule by the Department of Education would be ineligible for ten (10) years, or sooner if the Secretary of Education approves their request to become eligible again based on a plan of action to come into compliance with the rule.
Beyond the Rule
While DOE has proposed this rule, PSLF was a program approved by Congress, and the text of the law states that any 501(c)3 nonprofit would count as an "eligible employer".
This incongruity with the law's underlying text is of immense concern for the nonprofit sector. Federal law clearly states that all 501(c)3 organizations shall be eligible to participate in the PSLF Program, and their eligible full-time employees.
Potential Impact
Individuals employed with organizations at risk under this proposed rule would not be able to participate in the program, also effective July 1, 2026. This is likely to drastically impact the nonprofit workforce.
Take Action
The proposed rule is open for public comment for 30 days - ending September 17.
We encourage anyone - whether or not you and/or your organization could be impacted - to post a comment on this proposed rule during this comment period.
National Council of Nonprofits has issued this Comment Guide to help you craft your comments which includes additional overviews and specific directions on how to file your comment.
When ready, you can file your comment here.