Public Service Loan Forgiveness: Who and What Is at Risk?

On March 7, the administration of President Donald Trump signed an executive order (14325) titled “Restoring Public Service Loan Forgiveness.” The Orwellian-named measure, however, does nothing to “restore” public service loan forgiveness.

Instead, it sets up an ideological test that seeks to determine whether a nonprofit where a person works is a qualifying nonprofit for loan forgiveness or an ideologically non-qualifying nonprofit. In so doing, the Trump administration once again puts the Public Service Loan Forgiveness (PSLF) program at risk.

Public service loan forgiveness enables public sector and nonprofit workers to earn an accelerated write-off of their student loan debt. During the Biden administration, over one million borrowers benefited, compared with fewer than 7,000 beneficiaries during the previous Trump administration.

What Does the Public Service Loan Forgiveness Program Do?

The idea behind the PSLF program is simple: If you work for a public sector or nonprofit job for 10 years and make 120 regular monthly student loan payments, your remaining loan balance is supposed to be entirely forgiven. The program was enacted by Congress in 2007 and signed into law by President George W. Bush, with the goal of encouraging more people with college degrees to work for nonprofits or in the public sector.

Implementation, however, historically has been less smooth. In 2018, in the first round, fewer than 100 of 20,000 applicants—or less than one-half of 1 percent—were accepted for forgiveness. In 2019, again, an estimated 99 percent of 54,184 applications were denied.

The problems were legion. As I wrote for NPQ in 2022, “Payments may have been disqualified because the borrower had the wrong loans or for using the ‘wrong’ payment plan. Out of four possible payment plans, only two qualify.”

Unwinding this mess required a special waiver program from the US Department of Education to allow applicants, many of whom had no idea that some plans qualified while others did not, to switch to the correct plan and get qualified.

The good news: Ultimately, despite many hiccups, the bureaucratic duct tape ultimately held, and a million borrowers had their debt forgiven. The less good news: That progress is now at risk.

What’s at Risk?

The risks of the Trump administration’s proposed changes are two-fold. On the one hand is the ideological test—highly likely to be challenged in the courts—that the executive order establishes. Specifically, the banned categories are laid out in the order as follows:

(a) aiding or abetting violations of 8 U.S.C. 1325 [regarding undocumented workers] or other Federal immigration laws;

(b) 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;

(c) 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;

(d) engaging in a pattern of aiding and abetting illegal discrimination; or

(e) engaging in a pattern of violating State tort laws, including laws against trespassing, disorderly conduct, public nuisance, vandalism, and obstruction of highways.

These restrictions use coded language now familiar from the administration related to undocumented immigrants, gender-affirming care for transgender people, and organizations supporting Palestinian rights, among others. But beyond the direct impacts to the workforce serving such groups, one wonders how these regulations would be enforced.

One wonders how these regulations would be enforced…must a soup kitchen ask every person coming through the door for their identification papers?

According to section (a), must a soup kitchen ask every person coming through the door for their identification papers? Under (d), how would federal officials determine any bias or discrimination if they cannot use any of the 200 words the Trump administration has flagged to avoid or eliminate—like “bias,” “discrimination,” “excluded,” “status,” “woman,” “historical,” and so on? Item (e) would appear to imperil the exercise of free speech, at least in public, as the broad language could seemingly be used to preclude someone from having their student loan forgiven based on completely unrelated conduct.

Other Threats to Student Loan Forgiveness

At first glance, there aren’t any current changes on the Federal Student Aid website, except that a federal court’s injunction prevents implementation of the “Saving on a Valuable Education (SAVE) Plan and parts of other income-driven repayment (IDR) plans.” Enrolling in SAVE or another income-based plan is required to be eligible for PSLF.

As of this writing, the website’s PSLF page acknowledges the order, stating, “We are reviewing the recent Executive Order regarding the Public Service Loan Forgiveness (PSLF) Program. There are no changes to PSLF currently, and borrowers do not need to take any action.”

However, an attempt to access the online application did not go through. This is creating frustration and panic for new borrowers who have completed their degrees and are applying for a repayment plan.

For borrowers already in the system, the paper application for loan consolidation to SAVE or IDR (income-driven repayment) seems to work. There are doubts, though, that applications will be processed, at least in a timely manner.

Also likely to affect applicants are Trump administration efforts to cut federal staff. On March 11, the US Department of Education announced it was laying off 1,300 employees, with about 600 people accepting severance packages, leaving 2,183 to do the work, according to NPR.

The layoffs cut 25 percent of the staff of Federal Student Aid, the department’s largest division. The Office of Civil Rights within the Department of Education—which includes lawyers who assist parents who believe their child has experienced discrimination in education—was cut in half, with seven of its 12 regional offices closed completely. And according to multiple sources reporting to ABC News, Trump is expected to sign an executive order later today to further diminish the Department of Education, directing Education Secretary Linda McMahon to “take all necessary steps permitted by law to dissolve [it].”

Resistance to Cuts

A group of 21 state attorneys general, led by Leticia James of New York, have sued the Trump administration in Massachusetts federal court in order to contest the cuts at the Department of Education, calling them “illegal and unconstitutional.”

For their own protection, student borrowers should continue to take screen shots of their accounts, especially their full history of payments.

“Firing half of the Department of Education’s work force will hurt students throughout New York and the nation, especially low-income students and those with disabilities who rely on federal funding,” James says in a news release. “This outrageous effort to leave students behind and deprive them of a quality education is reckless and illegal.”

Additionally, Stanley Tate, an attorney specializing in student debt law, tells TV station WANE of Fort Wayne, IN, that he is skeptical about the ability of the Trump administration to enforce its order. The 2007 law does not allow for distinctions among nonprofits, he notes. “I think it’s just going to lead to litigation and ultimately nowhere.”

Steps to Take

While the ability of the Trump administration to enact its policies remains in doubt, this is not a reason for inaction. For their own protection, student borrowers should continue to take screen shots of their accounts, especially their full history of payments.

It’s also important to organize with others facing similar circumstances. The Debt Collective, which has long organized student loan borrowers and others, launched its 100 Days to Build Debtor Power initiative as a direct response to the first 100 days of the Trump administration.

As the group explains on its website, “The first 100 days of this presidential administration is a key window for us to organize, to build solidarity, and to grow a movement that is prepared to stand shoulder to shoulder in the fights ahead. There is power in our collective anger—but only if we are organized.”