President Donald Trump is expected to issue an executive order that may substantially limit student loan forgiveness for public servants.
Public Service Loan Forgiveness, or PSLF, is a popular federal student loan forgiveness program that can eliminate a borrower’s debt after 10 years of working for qualifying nonprofit or government organizations. More than a million borrowers have qualified for relief under the program, largely as a result of improvements made during the Biden administration.
But on Friday, Trump announced that he will be signing an executive order to limit eligibility for the PSLF program, based on unspecified concerns about the actions of certain nonprofit organizations. Under the proposed order, borrowers would be cut off from PSLF if their organization engages in “illegal, or what we would consider to be improper activities.” The White House has not provided much detail on how broadly it will define “illegal” or “improper” activities. Here’s what borrowers need to know.
How Student Loan Forgiveness Under PSLF Works
PSLF is a bipartisan federal student loan forgiveness program created in 2007 under President George W. Bush. The program was intended to incentivize people to take jobs in traditionally high-need, lower-paying roles in the nonprofit and public sectors. Teachers, nurses, firefighters, members of the military, and people who work for nonprofit charitable and religious organizations can qualify.
“If you’re employed by a government or not-for-profit organization, you might be eligible for the PSLF Program,” explains the Department of Education on its website. “The PSLF Program forgives the remaining balance on your Direct Loans after you’ve made the equivalent of 120 qualifying monthly payments under an accepted repayment plan while working full-time for an eligible employer.”
The PSLF program was plagued by problems, including dismal approval rates, for years, in part due to the program’s complicated eligibility rules, as well as poor record-keeping and oversight by loan servicers and the Department of Education. But following improvements made to the program under the Biden administration, approvals have skyrocketed, with more than a million borrowers now having received student loan forgiveness under the program.
Trump Plans To Limit Student Loan Forgiveness Under PSLF
President Trump announced at the White House on Friday that his administration is preparing to issue an executive order that would “bring about modifications to the Public Service Loan Forgiveness program in order to ensure that people engaged in these sorts of activities can’t benefit from a program that’s not intended to support” such activities. If an organization is “not good” (as Trump indicated during the announcement), borrowers “wouldn’t get forgiveness” of their student loans under PSLF.
Broadly limiting PSLF eligibility through executive action may violate the statute that authorizes PSLF, as well as related regulations implemented by the Department of Education. The statute governing PSLF defines a “pubic service job” as “a full-time job in emergency management, government (excluding time served as a member of Congress), military service, public safety, law enforcement, public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations, as such terms are defined by the Bureau of Labor Statistics), public education, social work in a public child or family service agency, public interest law services (including prosecution or public defense or legal advocacy on behalf of low-income communities at a nonprofit organization), early childhood education (including licensed or regulated childcare, Head Start, and State funded prekindergarten), public service for individuals with disabilities, public service for the elderly, public library sciences, school-based library sciences and other school-based services, or at an organization that is described in section 501(c)(3) of title 26 and exempt from taxation under section 501(a) of such title; or teaching as a full-time faculty member at a Tribal College or University as defined in section 1059c(b) of this title and other faculty teaching in high-needs subject areas or areas of shortage (including nurse faculty, foreign language faculty, and part-time faculty at community colleges), as determined by the Secretary.”
The PSLF statute provides no exceptions to the above definition of a public service job, particularly for 501(c)(3) nonprofit organizations, and does not authorize a president to limit student loan forgiveness eligibility based on an organization’s activities. If implemented, the executive order would appear to contradict assurances made by Education Secretary Linda McMahon during her confirmation hearing that she would uphold federal student loan forgiveness programs authorized by Congress, specifically referencing the PSLF program.
“This is about more than PSLF or ED policy,” said Mike Pierce, Executive Director of the Student Borrower Protection Center, in a tweet on Friday. “Donald Trump is weaponizing debt to police speech that does not toe the MAGA party line. Our Democracy is on fire.”
Republicans Exploring Other Ways Of Limiting Student Loan Forgiveness Under PSLF
President Trump’s executive order may be only the first step in trying to limit student loan forgiveness eligibility for the PSLF program. Congressional Republicans may use legislation to significantly diminish PSLF, as well.
To help offset more than $4 trillion in projected costs associated with extending and expanding major tax cuts, Republican lawmakers are considering numerous cuts to federal student loan programs. According to a memo released by the House Budget Committee in January, GOP leaders are exploring making unspecified changes to eligibility for the PSLF program.
In addition, Republican leaders are considering changes to the tax code that could eliminate the nonprofit status of hospitals. “More than half of all income by 501(c)(3) nonprofits is generated by nonprofit hospitals and healthcare firms,” the memo reads. “This option would tax hospitals as ordinary for profit businesses.”
Eliminating the nonprofit status hospitals could result in $260 billion in savings over 10 years, Republican lawmakers project. But it could also jeopardize student loan forgiveness for more than 4.8 million nurses, doctors, medical technicians, and other healthcare workers who have made decisions relying on the promise of debt relief under the PSLF program.
Meanwhile, the Department of Education took down income-driven repayment applications and, as of last week, paused all processing of income-drive repayment requests in response to a recent court order. Because income-driven repayment is typically a required component of PSLF, the move has effectively blocked many borrowers from pursuing student loan forgiveness under the program.
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