Latest news with #PSLF-eligible
Forbes
15-05-2025
- Business
- Forbes
Major Update For 6 Million Borrowers About Potential Loss Of Student Loan Forgiveness Eligibility
13 million nonprofit workers, including teachers, nurses, and university staff, could lose access to ... More student loan forgiveness under a GOP tax proposal. A low-profile provision buried in the GOP's 2025 tax proposal could spark one of U.S. history's most significant rollbacks in student loan forgiveness and repayment eligibility, specifically targeting the Public Service Loan Forgiveness program. The bill would allow the Treasury Secretary to unilaterally revoke the nonprofit status of any organization it designates as a terrorist supporting organization. While its language appears aimed at bad actors, the downstream effect could destabilize the PSLF for the more than 12.8 million Americans who work at nonprofits. The PSLF program requires borrowers to work full-time for a qualifying employer, most often government agencies or 501(c)(3) nonprofits, for 10 years while making income-driven repayments. In exchange, the remainder of their federal student loan balance is forgiven. However, if an employer loses its 501(c)(3) designation, its employees become ineligible for student loan forgiveness, even years into the program. Under this proposed bill, the Secretary of the Treasury could strip that status without the checks and balances usually afforded to the IRS or federal courts. That could open the door to politically motivated or ideologically driven revocations, placing millions of borrowers at risk of losing forgiveness they've been working toward for years. According to 2022 data from the U.S. Bureau of Labor Statistics, approximately 12.8 million people work for nonprofit organizations in the United States. That's more than 10% of the private workforce. The majority of those workers are clustered in two PSLF-relevant sectors: healthcare and education. That means nearly 12.8 million nonprofit workers are in fields where student loan debt is typical and PSLF eligibility is crucial; think of nurses at nonprofit hospitals, adjunct professors, K–12 teachers at religious schools, social workers, community health staff, and early childhood educators. If the bill passes, none of their PSLF eligibility would be guaranteed. We can triangulate the addressable borrower population that would potentially be impacted in other ways too. On the lower end, we know that approximately 3.6 million people are eligible for Public Service Loan Forgiveness based on their employment in qualifying public service roles such as education, healthcare, social work, the military, and government positions. Secondly, according to sector data, 501(c)(3) organizations make up about 75% of all nonprofits (1.48 million out of 2 million). If 75% of nonprofits are 501(c)(3), and we assume a similar share of nonprofit employment is in these organizations, then about 75% of the 12.8 million nonprofit employees work for PSLF-eligible employers. This would equal approximately 9.6 million nonprofit employees potentially eligible for PSLF, provided they meet other criteria (full-time, correct loan type, etc.). The actual number will likely be a bit lower after accounting for individual employment and loan circumstances. We also know from TIAA's 2020 Nonprofit Student Debt Survey that among nonprofit employees with at least a bachelor's degree, about 47% reported currently having student loan debt. This is based on a nationally representative survey of nonprofit and public sector workers. If we apply the 47% figure from TIAA's study to the total nonprofit workforce, then we get approximately 6 million nonprofit employees who likely have student loan debt. President Donald Trump has already called out nonprofit organizations and even specific institutions in the education space and signaled he intends to act against them. In April 2025, Trump publicly threatened to revoke the nonprofit status of Harvard University, accusing it of harboring terrorist-inspired ideology. That wasn't idle rhetoric. His administration also announced funding freezes for Harvard, Columbia, and the University of Pennsylvania over their handling of campus protests following Hamas's attack on Israel on October 7, 2023. These institutions are 501(c)(3) nonprofits and major PSLF-eligible employers. Harvard, for instance, employs more than 18,000 people in Massachusetts. Penn and Columbia are also large employers, with thousands of staff in public-facing academic, healthcare, and administrative roles. Under current law, revoking tax-exempt status is a lengthy process requiring IRS review and justification. But the GOP's new bill would give that authority solely to the Treasury Secretary, who could make such designations based on a claim of "material support" for terrorism, even if no charges or investigations have occurred. That shift could instantly disqualify every employee at those institutions from PSLF. Those months would no longer count, no matter how far along they are toward loan forgiveness. The government wouldn't need a trial, audit, or congressional vote, just a designation. This legislative provision builds on President Trump's executive order earlier this year directing the Department of Education to tighten PSLF eligibility requirements. That order called for new rules excluding nonprofits involved in illegal or anti-American activity including support for immigration violations, campus protests, or what the administration labeled hate-based movements. While that executive order didn't change tax status, it foreshadowed this legislative strategy. With the Treasury granted sole power to label and suspend nonprofits, the executive branch could rapidly cut off PSLF access for entire categories of organizations. The White House has not clarified how it defines terrorist supporting, but observers fear it could be used to target immigration nonprofits, racial justice groups, climate organizations, or university systems. Beyond individual borrowers, this bill introduces potential structural risk to the nonprofit sector. Nonprofits may begin self-censoring to avoid political retribution if the Treasury can strip tax-exempt status without judicial review. That could stifle advocacy, research, and direct services in reproductive health, refugee resettlement, environmental justice, or racial equity. It could also disincentivize professionals from pursuing nonprofit careers if PSLF eligibility is seen as unstable. That would worsen already strained education and healthcare staffing pipelines, where burnout and turnover are high. The GOP's tax bill is still in the early stages of the legislative process; however, student loan forgiveness and repayment, and specifically PSLF eligibility, could be fundamentally altered overnight for up to 6 million borrowers.
Forbes
01-05-2025
- Business
- Forbes
Republicans Will Cut Off Student Loan Forgiveness For Medical Residents Under New Plan
UNITED STATES - FEBRUARY 5: Chairman Tim Walberg, R-Mich., attends the House Education and Workforce ... More Committee hearing on Wednesday, February 5, 2025. The committee passed a significant higher ed reform bill this week that would cut off student loan forgiveness for medical and dental residents (Bill Clark/CQ-Roll Call, Inc via Getty Images) House Republicans this week unveiled sweeping legislation to remake the federal student loan system. Nearly every element of the federal student aid system, from grants to aid disbursement to repayment plans and loan forgiveness programs, would be impacted if the plan is enacted. And buried deep in the bill is a major change that would cut off a popular federal student loan forgiveness program for medical residents and interns. 'This bill set forth by Committee Republicans not only would save taxpayers over $330 billion but also bring much-needed reform in three key areas: simplified loan repayment, streamlined student loan options, and accountability for students and taxpayers,' said Education and Workforce Committee Chairman Tim Walberg (R-MI) in a speech on the House floor on Tuesday. 'Moreover, it simplifies and improves the system going forward by streamlining repayment options and providing targeted assistance to struggling borrowers who need it rather than blanket bailouts for those who don't." While not expressly called out in Chairman Walberg's speeceh, the bill explicitly cuts off medical and dental residents from key student loan forgiveness benefits, suggesting that the legislation's authors believe these individuals don't need the relief. The proposal is intended to become part of a massive reconciliation 'mega-bill' that Republican lawmakers hope to enact this summer. The reconciliation process, which allows legislation to pass with simple, party-line majorities in Congress without crashing into a Senate filibuster, would facilitate the GOP's expansion of expiring tax cuts and slash government spending to cover the associated costs. Public Service Loan Forgiveness allows borrowers to qualify for a discharge of their federal student loans after making 10 years of qualifying payments. Under current law, a qualifying payment is one made on a Direct federal student loan under either a 10-year Standard plan or one of several income-driven repayment options, while the borrower is employed full-time by an eligible public service employer. This includes 501(c)(3) nonprofit organizations and government or public entities. Many nonprofit and public hospitals and community health centers are PSLF-eligible employers. The statute governing PSLF, which was passed by Congress and signed into law by President George W. Bush in 2007, does not distinguish between different types of public service work, as long as the entity is a 501(c)(3) nonprofit or public organization and the borrower is meeting all of the program's eligibility criteria. That means someone who is employed at, for instance, a nonprofit hospital, could qualify for PSLF regardless of whether they are a medical technician, a nurse, a doctor, or an administrative support staff member. While doctors and nurses may earn significantly more income than other employees at the same organization, they likely would be earning comparatively much less than they would in a private practice setting. These borrowers also likely carry significantly higher student loan balances due to their education, and would have much higher monthly payments under income-driven repayment plans as a result. But for the first time in the PSLF program's history, the House Republican bill – if enacted – would target a specific group of public service employees and cut them off from student loan forgiveness under the program. 'The term 'public service job' does not include time served in a medical or dental internship or residency program (as such program is described in section 428(c)(3)(A)(i)(I)) by an individual who, as of June 30, 2025, has not borrowed a Federal Direct PLUS Loan or a Federal Direct Unsubsidized Stafford Loan for a program of study that awards a graduate credential upon completion of such program," reads the legislative text under the heading, 'Exclusion.' This essentially would mean that if the bill becomes law, doctors and dentists would receive no PSLF credit during their residencies and internships. Typically, medical and dental residents work long hours (often at nonprofit or public hospitals) for very low pay for several years at the beginning of their careers, before moving into more permanent roles. Many medical residents repay their student loans under income-driven repayment plans during that time, given their low income, and interest accrual often means significant balance increases by the time the borrower completes their residency. Residency periods historically have counted toward student loan forgiveness under PSLF, as long as the borrower is meeting all of the program's eligibility rules. The good news for PSLF borrowers is that the House Republican draft reconciliation bill would not make other significant changes to the program, such as by capping loan forgiveness or cutting off borrowers at certain income levels. Some advocates had been concerned that additional restrictions on student loan forgiveness under the program would be included in the GOP bill. But that's not the end of the story. This week, the Department of Education held its first public hearing as part of negotiated rulemaking, a lengthy process that allows the department to update, change, or repeal regulations governing federal student loan programs. And PSLF is explicitly a topic for negotiated rulemaking this year. The department is considering enacting new rules to implement President Donald Trump's executive order in March that would cut off student loan forgiveness eligibility under PSLF for organizations that engage in certain 'illegal' activities. Advocacy groups have warned this is not allowable under the PSLF statute passed by Congress, and that the definition of 'illegal' in the President's order is so vague and broad that it could wind up sweeping up untold numbers of nonprofit organizations and government entities whose mission or actions the Trump administration simply disagrees with. 'This month, the Department of Education began a process called negotiated rulemaking or 'neg reg' that will decide the future of student loan programs including Public Service Loan Forgiveness (PSLF),' said the Student Debt Crisis Center in an email this week. 'The current Trump Administration is seeking to end PSLF eligibility for public service workers working at certain non-profits or serving certain communities.' Meanwhile, the Trump administration is taking additional steps that could jeopardize student loan forgiveness under PSLF. Earlier this month, the administration began targeting the nonprofit status of Harvard University, which could be a prelude to a broader effort to eliminate the tax-exempt status for other nonprofit organizations that the administration has clashed with. So far, that has not yet happened, but advocates remain concerned. In the meantime, Republican lawmakers are considering a separate proposal that would remove the tax-exempt status from nonprofit hospitals, which could make additional healthcare workers ineligible for PSLF.
