Student Loan Forgiveness: “See You in Court” Say PSLF Advocates

On March 7, President Donald Trump signed an executive order attempting to exclude certain student borrowers from the Public Service Loan Forgiveness program. As we’ve covered in several articles here on OnlineEducation.com, PLSF is the 2007 federal program signed into law by President George W. Bush that forgives student loans for public service workers after only 120 payments over 10 years.

According to government data, PLSF enrolled more than two million borrowers through certified employers in December 2024. They include public school teachers; doctors, nurses and other clinicians who work for nonprofit hospitals; firefighters and police officers; public interest lawyers; and military employees of the Department of Defense. The program incentivizes people to choose lower-paying jobs and careers crucial to society’s functioning by offsetting some of their financial sacrifices through student loan forgiveness.

In an attempt to limit eligibility by excluding employees of organizations involved in activities deemed “anti-American,” Trump’s order sparked immediate controversy. This report briefly reviews the order’s provisions, implications for nonprofits, legislative prospects, and potential legal challenges. We also present a significant additional risk: the possibility that the Administration could attempt to reclassify nonprofit hospitals as for-profit entities in an effort to deprive their workers of PSLF benefits.

The executive order redefines “public service.” The language excludes employees of organizations who engage in activities that have what the order claims to be a “substantial illegal purpose.”

“The PSLF Program also creates perverse incentives that can increase the cost of tuition, can load students in low-need majors with unsustainable debt, and may push students into organizations that hide under the umbrella of a non-profit designation and degrade our national interest,” says the order.

Here are the five categories the order includes:

1. Aiding or abetting violations of 8 U.S.C. 1325 or other Federal immigration laws;
2. 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;
3. Child abuse, including the chemical and surgical castration or mutilation of children or the trafficking of children to so-called transgender sanctuary States for purposes of emancipation from their lawful parents, in violation of applicable law;
4. Engaging in a pattern of aiding and abetting illegal discrimination; or
5. Engaging in a pattern of violating State tort laws, including laws against trespassing, disorderly conduct, public nuisance, vandalism, and obstruction of highways.

The White House frames this order as a crackdown on “anti-American” behavior. These categories are significant, because employees can’t receive PSLF benefits unless they work for an employer the program certifies.

So in other words, the order directly targets nonprofit organizations certified by the PSLF program—such as charities and advocacy groups—by suggesting that their activities, policies or political views should disqualify them from certification. Such decertification would in turn punish all their employees by depriving them of PSLF benefits.

But Jessica Thompson, a senior vice president at the Institute for College Access & Success, told CNBC that “the PSLF program, which was created by Congress almost 20 years ago, does not permit the administration to pick and choose which nonprofits should qualify.” That’s because no such disqualification language exists within the program’s authorizing statute at 34 C.F.R. 685.219, and instead the statute clearly specifies categories of qualifying employers. Here’s that language:

(i) A United States-based Federal, State, local, or Tribal government organization, agency, or entity, including the U.S. Armed Forces or the National Guard;

(ii) A public child or family service agency;

(iii) An organization under section 501(c)(3) of the Internal Revenue Code of 1986 that is exempt from taxation under section 501(a) of the Internal Revenue Code;

(iv) A Tribal college or university; or

(v) A nonprofit organization that—

(A) Provides a non-governmental public service as defined in this section, attested to by the employer on a form approved by the Secretary; and

(B) Is not a business organized for profit, a labor union, or a partisan political organization.

Attorney and student loan expert Adam Minsky argues that this order could even be illegal because it might violate statutory provisions like those above. “That statute details the types of organizations that qualify for PSLF, and does not permit a president to change the law to limit the PSLF eligibility of 501(c)(3) nonprofit organizations or government entities,” he writes.

Three other advocates also released statements characterizing the order as illegal. They include Randi Weingarten, the president of the American Federation of Teachers, Natalia Abrams, the president of the Student Debt Crisis Center, and Kristin McGuire, the executive director of Young Invincibles who in her remarks didn’t pull punches:

This action is unconstitutional and illegal. Trump cannot make major modifications to a program that was written into law by Congress. He is abusing his power to punish borrowers for ideological reasons and blocking necessary relief that has been mandated for all 501(c)(3) employees by law since 2007. Trump is weaponizing loan forgiveness under the guise of morality, toying with the hopes of borrowers who are working towards relief from crushing debt.

The executive order’s vague “substantial illegal purpose” language makes it difficult to identify specific PSLF-certified nonprofits who might be impacted. Moreover, we couldn’t find a source of public records which tracks employer characteristics like those punished by this order.

However, to identify affected nonprofits, one approach might involve examining organizations displaying patterns of protest-related arrests under state laws according to Section “E” of the order’s language above. For example, the nonprofit environmental advocacy group Greenpeace has had members arrested for trespassing during many protests, including a famous 1988 incident when two activists were charged with trespassing after a 29-hour protest atop a 200-foot Chicago smokestack. Similarly, the NAACP saw its former leader, Rev. William Barber of the Yale Divinity School, convicted of trespassing following a 2017 protest at the North Carolina statehouse.

These examples illustrate a potentially huge range of potential targets under the order’s criteria. Although the language includes five categories within the definition of “substantial illegal purpose,” the Administration could argue that other categories may also exist.

Minsky adds that “the categories of organizations referenced in the executive order are so broad and vague that it could theoretically be used to deny student loan forgiveness eligibility on a wide scale to nearly any organization that does not align with the Trump administration’s policies, including potentially even state and local governments. That could also potentially run afoul of federal law.”

The order also says that PSLF “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.”

But consumer and borrower advocates argue that is not true. Several swiftly criticized the order, and accused the Administration of precluding student loan forgiveness for anyone who works in a field specifically disfavored by President Trump. For example, Chicago higher education expert and frequent CNBC contributor Mark Kantrowitz told the network that through the order the White House could attempt “to exclude jobs that they deem objectionable.”

The order directs the secretary of education to propose revisions to PSLF’s authorizing statute at 34 C.F.R. 685.219. However, Title IV of the Higher Education Act of 1965 (HEA) actually requires the U.S. Department of Education to use negotiated rulemaking to develop regulations that revise the programs created under its authority, unless the secretary determines that the process would be ‘impracticable, unnecessary, or contrary to the public interest.”

Nevertheless, because PLSF was created by an act of Congress as an amendment to the HEA, experts agree that modifying PSLF’s core eligibility criteria—the main thrust of this order—would require Congressional approval beyond administrative action alone.

Winning that approval would necessitate a steep and probably insurmountable political climb. Currently only 53 Republicans hold Senate seats, even though under the Senate rules, passing most legislation will require a filibuster-proof, 60-vote supermajority. That gridlock means the Administration would need seven Democrats to cross party lines.

And those defections almost certainly won’t happen. Given PSLF’s popularity among public service workers like nurses and teachers that’s driving its strong bipartisan support, securing these votes by the Democrats seems highly unlikely. The divisive political climate following the 2024 election further complicates this situation, with no Democrats likely to back any sort of GOP-led PLSF overhaul—and especially one that the Administration frames as punitive.

Still, assuming that its efforts to completely abolish the U.S. Department of Education prove unsuccessful, the White House might attempt to bypass Congress by reinterpreting some of the PSLF regulations through rulemaking by the weakened agency—which lost half of its 4,200-employee labor force when Trump fired them on March 11. However, that rulemaking process couldn’t address eligibility issues, would likely face immediate legal challenges, might require a year or more to complete, and could always be reversed by a future administration.

Aaron Ament, the president of the borrower advocacy group Student Defense said on March 7 that “If the Trump Administration follows through on this threat, they can plan to see us in court.”

Critics charge that the order attacks the free speech rights of borrowers under the First Amendment, plus attacks organizations with agendas that conflict with objectives of the Administration.

Persis Yu, the managing counsel and deputy executive director of the Student Borrower Protection Center, told NPR that “what is happening is that debt is being used to scare hardworking public service workers from serving the most vulnerable members of our society, or speaking out against the Trump Administration’s radical agenda.”

Another potential scenario is that Congressional Republicans might attempt to reclassify nonprofit hospitals and medical centers as for-profit entities to exclude their workers from PSLF. This move would not only exclude as many as 4.8 million potential borrowers from the program, but it would also save $260 billion over 10 years that would enable Congress to expand and extend tax cuts expiring for corporations, estates and individuals.

Although not directly mentioned in the order, this proposal fits the Administration’s history of targeting the PSLF program during Trump’s first term. That’s when 2018 investigations by the Government Accountability Office and the Consumer Financial Protection Bureau found that his education secretary Betsy DeVos had refused to approve 99 percent of PSLF applications. By contrast, the Obama Administration had approved 99 percent of PSLF requests, and during his last week in office President Joe Biden announced $465 million in student loan forgiveness for 6,100 PSLF borrowers.

But reclassifying nonprofit hospitals faces hurdles. America’s 2,934 nonprofit hospitals are all tax-exempt under Section 501(c)(3), which automatically qualifies their employees for PSLF eligibility. Reclassifying these hospitals as for-profit entities would require changing their IRS status–a process also requiring Congressional action.

With Republicans holding 53 Senate seats, securing a 60-vote supermajority under normal circumstances would be just as unrealistic as if the GOP were trying to rewrite PSLF’s authorizing legislation. But in this instance, the GOP might attempt to pass the legislation through the omnibus budget reconciliation process, which only requires a simple majority. Experts currently appear divided as to whether changes to IRS status would qualify under the rules for a reconciliation vote.

Alternatively, the administration might attempt to reinterpret PSLF regulations to exclude nonprofit hospitals, arguing they engage in activities “inconsistent with public service” and deserve to be taxed as ordinary, for-profit businesses.

However, this move would certainly face court challenges, given the specific inclusion of § 501(c)(3) nonprofits among the qualifying organizations listed within PSLF’s authorizing legislation.