Advocates Mobilize to Stave Off Cuts to Federal Student Loan Programs

In March, NPQ reported on President Donald Trump’s executive order to create an ideological test that would determine whether public service workers employed at nonprofits are eligible for the Public Service Loan Forgiveness (PSLF) program, based on an organization’s scope of work. Since 2007, PSLF has led to loan forgiveness for over one million borrowers who work in the public or nonprofit sector and who have made 120 qualifying monthly payments.

Now both the US Department of Education and Congress are further complicating things. The US House Committee on Education and Workforce voted on April 29 to cut over $330 billion in higher education funding over the next decade, including provisions that will affect medical students. Under the restrictions, medical residents will no longer be able to apply their working hours toward the PSLF program, and graduate education loans will be capped at $100,000. The new legislation is intended to be part of the main “budget reconciliation” bill and offset Trump’s tax cuts.

The US House Committee on Education and Workforce voted…to cut over $330 billion in higher education funding over the next decade.

Meanwhile, at the Department of Education, a “negotiated rulemaking” process has been initiated, with the first item on its agenda listed as: “Refining definitions of a qualifying employer for the purposes of determining eligibility for the Public Service Loan Forgiveness program.”

In response, a group of 186 organizations led by the Student Borrower Protection Center (SBPC) and Democracy Forward—a nonprofit that consists of policy experts, lawyers, researchers, and specialists in communication—released a public letter to oppose the new measures. Signatories include a who’s-who of national labor and civil rights groups, ranging from the AFL-CIO to the NAACP, along with dozens of state and local groups.

A Growing Movement

In their May 5 letter, the signatory organizations affirmed: “We write in strong opposition to the Trump administration’s attempts to implement Project 2025, which calls for gutting Income-Driven Repayment (IDR) options and ultimately eliminating PSLF, which will only push borrowers further into debt and relief further out of reach.”

They further advised, “The Administration should move to enact policies that better protect student borrowers, rather than pursue misguided policies that will drive up costs and weaken protections.”

The letter concludes: “The Higher Education Act is crystal clear that a ‘public service job’ includes any employment in government or at a 501(c)(3). We strongly oppose any effort by the Trump Administration to limit PSLF eligibility to cherry pick organizations that they may not agree with.”

The signatories on this letter are not alone. More broadly, over 100 nonprofit and public service organizations have come together to form the PSLF Coalition. One of its members, Independent Sector, contends that PSLF should “be protected and made easier to access, not harder, for the nonprofit workforce and other public service workers who have upheld their end of the bargain, made their required payments, and dedicated their careers to serving their communities.”

What’s at Stake

With PSLF specifically, there are two main threats at present. One is the possibility that the administration will follow through on the threat contained in the initial executive order and exclude people who work at some nonprofits from the program’s benefits. Here it should be noted that the existing federal statute establishing the PSLF program mandates the inclusion of all nonprofits—which strongly suggests that the administration is acting far outside its scope of legal authority.

Over 100 nonprofit and public service organizations have come together to form the PSLF [Public Service Loan Forgiveness] Coalition.

A second threat is the proposed legislation in Congress to make cuts to higher education programs. This, while legally permissible, faces considerable political opposition. For instance, the American Medical Association (AMA) issued its own letter on April 30 stating, “The AMA urges the Administration to consider the importance of the Public Service Loan Forgiveness (PSLF) program for physician borrowers and encourages the Department to make the PSLF program more widely available to physician borrowers while also making other income-based repayment plans more accessible.”

Of course, PSLF cuts are not the only, or even primary, cuts being envisioned. As the SBPC details, the impacts on higher education cuts included in the pending legislation are wide-ranging:

• Over 61 percent of Pell Grant recipients (over four million low-income borrowers) could see their award reduced or eliminated due to stricter eligibility rules, with one in seven Pell Grant recipients (nearly one million borrowers) potentially losing their awards entirely. For similar reasons, approximately one in four Pell Grant recipients (over 1.5 million low-income borrowers) will see a $1,479 drop in their award.
• New caps on federally subsidized loans would increase student payments by pushing more students to take on higher-interest private loans to cover the gap.
• Tools established during the Biden administration, like the Saving on a Valuable Education (SAVE) Plan and other similar payment-reducing programs, would be stricken, elevating repayment costs for many student loan borrowers by an estimated $100 to $400 per month.
• The federal government’s ability to forgive student loans would be capped at $100 million. (By contrast, under Biden, over $150 billion in debt was forgiven).

An Added Complicating Factor: Renewed Collections

On top of the policy debates, the Trump administration is cracking down on borrowers who are in default. As of May 5, the Department of Education began to refer such borrowers to a collections program through the Department of the Treasury. All student loan payments and interest accrual were paused by the federal government during the COVID-19 pandemic, between March 2020 and September 2023.

As soon as the pause was lifted, interest compounded monthly on accounts in forbearance. As of October 2024, payments that are late by over 90 days have again been reported to national credit bureaus. A Department of Education statement indicated it would start notifying delinquent borrowers via email, advising them to make a payment or to enroll in a different repayment plan.

All told, outstanding student debt is $1.6 trillion. According to NPR, five million borrowers are more than a year in arrears, with an additional four million approaching default status.

Part of the challenge includes communicating the policy changes. Jana Heartwood, who owes more than $40,000 for a nursing degree, told CBS News that she had not received any notifications since repayments resumed last year.

PSLF and other income-based repayment plans are “lifelines and not loopholes.”

The Treasury could begin deducting wages, tax refunds, or any government benefits directly from borrowers’ paychecks by the end of the summer. “This could not have come at a worse time for millions of Americans,” Aissa Canchola Bañez, SBPC’s policy director, told NPR. Those borrowers, she added, “are already finding themselves having to navigate such incredible economic uncertainty over the last few months.”

Lifelines, Not Loopholes

People across the age spectrum are affected by these changes. In 2017, the Consumer Financial Protection Bureau issued a report noting that “consumers age 60 and older are the fastest growing age-segment of the student loan market”—the outcome not just of adult education but of “parents and grandparents financing their children’s and grandchildren’s college education.”

However, there is some good news. As of this writing, the Federal Student Aid website indicates that the PSLF program is still operating. The current qualifying jobs remain:

• US-based government organizations (federal, state, local, or tribal), including people working in the military and teachers in public schools
• Tax-exempt nonprofits under Section 501c3 of the Internal Revenue Code
• Other nonprofits that devote a majority of their work to providing qualifying public services such as emergency management and public safety

For borrowers, it remains a good practice to regularly take screen shots and print out account information, especially payment history on Federal Student Aid pages.

Meanwhile, advocacy continues. On May 1, Carolina Rodriguez of the Community Service Society of New York concluded her remarks at a federal hearing by noting that programs like PSLF and other income-based repayment plans are “lifelines and not loopholes.”

It’s an important point. As I have noted before, although the federal system of financing education through debt is misguided, forcing people to borrow at higher-interest rates will do nothing but make accessing higher education that much more difficult.