Education Department Advances Rule Limiting Student Loan Forgiveness for Some Nonprofit Employees

The Education Department has proposed a 185-page rule revising the eligibility requirements for Public Service Loan Forgiveness, which cancels the education debt of government and nonprofit employees after 10 years of service and 120 monthly loan payments. The rule allows the education secretary to disqualify employers who engage in activities deemed to have a "substantial illegal purpose" on or after July 1. This would effectively prevent employees of nonprofits that work with undocumented immigrants, provide gender transition care for minors, or engage in public protests from getting their federal student loans forgiven.

Key Takeaways:

• The rule targets nonprofits that engage in activities deemed to have a "substantial illegal purpose" on or after July 1, making it difficult for employees of these organizations to get their federal student loans forgiven.
• The rule specifically disqualifies employers who aid and abet violations of federal immigration laws, support terrorism, engage in violence to obstruct or influence federal government policy, or engage in the chemical and surgical castration or mutilation of children in violation of federal or state law.
• Nonprofit employees are currently eligible for student loan forgiveness if they focus on areas that serve the public good, such as education, public health, or public interest law.
• Any payments a borrower makes on student loans after their employer is kicked out of the program will not count toward forgiveness.
• Employers would have the right to appeal if they are removed from the program.
• The change could derail borrowers who are close to reaching the loan forgiveness threshold if the administration says their employer violates the new rule.
• The rule brings much-needed guardrails to the program, according to conservative groups and lawmakers.
• Student advocacy groups and liberal lawmakers worry the rule politicizes PSLF and introduces unnecessary complexity into a program that is already notorious for its complex rules.

Statistics:

• Over 1 million student loan borrowers across more than 20 sectors of the economy have relied on Public Service Loan Forgiveness for debt relief.
• The new rule affects employees of nonprofits that work with undocumented immigrants, provide gender transition care for minors, or engage in public protests.
• 120 monthly loan payments are required for borrowers to be eligible for Public Service Loan Forgiveness.
• The Education Department is required by law to convene a committee of experts for a negotiated rulemaking to revise the criteria for qualifying employers.

Sources:

• "Education Department Advances Rule Limiting Student Loan Forgiveness for Some Nonprofit Employees." Danielle Douglas-Gabriel. The Washington Post.
• Executive Order signed by President Donald Trump in March excluding organizations that support "illegal immigration, child trafficking, pervasive damage to public property and disruption of the public order."