The Trump administration took new steps this week that could jeopardize student loan forgiveness for thousands of Americans based on their public service careers. And this is just the latest in a series of actions that threatens to undermine a bedrock of the federal student loan relief system.
Public Service Loan Forgiveness, or PSLF, was signed into law in 2007 by President George W. Bush. The program incentivizes borrowers to work in traditionally lower-paying fields in the nonprofit or government sectors. Those who repay their federal student loans while working in qualifying, full-time employment for at least 10 years (while meeting other program criteria) are entitled to receive loan forgiveness for any remaining balance once they have fulfilled their service obligation. Qualifying employers include any tax-exempt 501(c)(3) nonprofit organization, as well as public or government organizations at the federal, state, tribal, or local level. More than a million borrowers have had their student loans discharged under the program to date.
But President Donals Trump issued new directives last month targeting PSLF. And this week, the administration took additional steps that threaten the program’s future by targeting individual nonprofit institutions. And this may only be the beginning.
Student Loan Forgiveness Threatened By Removal Of Employer Nonprofit Status
This week, President Donald Trump suggested that the IRS should revoke the nonprofit tax-exempt status of Harvard University. The next day, news reports indicated that the IRS it taking potential steps to do just that.
The move followed Harvard’s rejection of conditions proposed by the Trump administration regarding the university’s internal policies for hiring staff, admitting students, creating its curriculum, and handling student activism. Harvard responded by letter to the administration rejecting the proposed conditions, arguing that the efforts to exert control over a private university were unconstitutional and an improper government overreach.
“The university will not surrender its independence or relinquish its constitutional rights,” said the university in the letter dated April 14. “Neither Harvard nor any other private university can allow itself to be taken over by the federal government. Accordingly, Harvard will not accept the government’s terms as an agreement in principle.
In response, the President Trump threatened Harvard’s tax-exempt status. “Perhaps Harvard should lose its Tax Exempt Status,” he said on Truth Social the next day.
Harvard has indicated that there is no legal basis for revoking Harvard’s tax-exempt status. And doing so may be difficult for the administration, say legal experts, as so far there is no clear evidence that Harvard has violated federal law that would warrant the removal of its nonprofit designation.
But if the Trump administration succeeds in eliminating Harvard’s nonprofit status, employees of the university would no longer qualify for PSLF. The PSLF program requires that student loan borrowers be employed by a qualifying nonprofit or government organization. Harvard employs approximately 19,000 people, not including employees at other Harvard-affiliated organizations, such as several teaching hospitals in Boston.
Other Nonprofits May Be Targeted, Threatening Student Loan Forgiveness Under PSLF For More Borrowers
The Trump administration’s actions threatening to revoke the nonprofit status of a major educational institution may only be the opening salvo in what could be a broader assault on nonprofit organizations. Some observers have suggested that Harvard may just be a test case, and that the Trump administration will soon expand its targets to include other nonprofit colleges and universities. That could jeopardize student loan forgiveness eligibility under PSLF for a far broader swath of borrowers.
“I think they’re going to go after a whole bunch of them,” said Newt Gingrich, the former House GOP leader, in a statement to The Washington Post this week.
And the targets may not just be limited to colleges and universities. On Thursday, President Trump threatened Citizens for Responsibility and Ethics in Washington, also known as CREW. CREW is a nonprofit legal organization focused on government ethics and accountability. The organization has filed several lawsuits against the Trump administration.
“The only charity they had is going after Donald Trump,” the President told reporters on Thursday. “So we’re looking at that,” he said, referencing the organization’s tax-exempt status. “We’re looking at a lot of things.”
As with Harvard, revoking the nonprofit status of CREW may be legally fraught. But if successful, it could prevent its employees from qualifying for student loan forgiveness under PSLF.
“Americans’ most cherished freedom is that we have a right to say what we believe without fear of governmental persecution,” said Public Citizen co-presidents Lisa Gilbert and Robert Weissman, in a statement to Politico. “President Trump’s comments threatening the charitable status of CREW because of the views the organization has expressed is a direct assault on that most cherished of freedoms.”
Revoking Nonprofit Status Is Part Of Broader Effort To Restrict Student Loan Forgiveness Under PSLF
President Trump’s actions this week come just one month after he issued an executive order to limit student loan forgiveness eligibility under PSLF for organizations that engage in “illegal activities.”
“The PSLF Program has misdirected tax dollars into activist organizations that not only fail to serve the public interest, but actually harm our national security and American values, sometimes through criminal means,” Trump said in the order. He directed the Department of Education to draft new rules and regulations implementing these restrictions. The department initiated the rulemaking process earlier this month.
The President’s order says PSLF eligibility should be restricted for organizations that facilitate activities such as “illegal immigration, human smuggling, child trafficking, pervasive damage to public property, and disruption of the public order.” But the statute governing PSLF does not allow either the president or the Department of Education to restrict student loan forgiveness eligibility for otherwise-qualifying organizations. And student loan borrower advocates have suggested that the directives in the order are so vague and broad that it could bar organizations from participating in PSLF on a massive scale – such as state governments that have DEI initiatives, or hospital systems that provide gender-affirming care. Some legal experts and borrower groups have argued that these restrictions would be unconstitutional, as they would punish institutions based on their viewpoint or associations.
“This executive order is a political attack on nonprofits with 501c3 status that support or engage in activities falling within the administration’s flawed and intentionally vague definition of ‘illegal,’” said Kristin McGuire, Executive Director of Young Invincibles in a statement in March. “This deliberately unclear and expansive definition creates an ambiguous catch-all, targeting advocacy organizations whose work doesn’t align with the Trump administration’s ideological agenda.”
Separately, Republican lawmakers in Congress are also considering revoking the nonprofit status of hospitals as part of an effort to offset the costs of massive tax cuts through a budget reconciliation bill. Doing so could jeopardize the student loan forgiveness eligibility under PSLF for nearly five million healthcare workers. GOP leaders are currently working on drafting legislative text for the reconciliation bill.
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