New Rule Threatens Public Service Loan Forgiveness Program for Employees of Certain Non-Profit Organizations

Strategic Insights -

The Department of Education has announced a new rule that will deny Public Service Loan Forgiveness (PSLF) eligibility to employees of certain non-profit organizations deemed to have a "substantial illegal purpose". This rule, set to go into effect in July, will have a chilling effect on organizations that work in areas such as immigration and equity and inclusion. The new rule invites arbitrary enforcement, undermining the intention of the PSLF program to provide a benefit to workers who devote themselves to public service.

Key Takeaways:

  • The new rule will deny PSLF eligibility to employees of organizations that the Secretary of Education deems to have a "substantial illegal purpose", including aiding and abetting the violation of immigration laws, engaging in a pattern of aiding or abetting illegal discrimination, and providing certain gender-affirming care to children in violation of state or federal law.
  • The rule will be enforced by the Department of Education, which can decide for itself whether an organization meets the standard.
  • The Trump administration's new rule violates the statute establishing the PSLF program and Congress's clear directive to provide loan forgiveness to all eligible employees of 501(c)(3) organizations.
  • Members of certain non-profit organizations, particularly those working in immigration and equity and inclusion, may be deterred from conducting their public service work due to fear of losing access to PSLF.
  • This rule undermines the original intention of the PSLF program, which was designed to provide a benefit to workers who devote themselves to public service.

Statistics:

  • 10 years: the amount of time a borrower must work in a public service job to be eligible for PSLF.
  • July: the month when the new rule will go into effect.
  • 501(c)(3): the tax-exempt charitable organizations that qualify as public service jobs under federal law.
  • "Substantial illegal purpose": a standard defined by the new rule that includes aiding and abetting the violation of immigration laws, engaging in a pattern of aiding or abetting illegal discrimination, and providing certain gender-affirming care to children in violation of state or federal law.

Sources:

  • The Department of Education
  • Public Citizen
  • Cormac Early, a lawyer with Public Citizen Litigation Group