What is the issue?

Congress established the Public Service Loan Forgiveness (PSLF) Program in 2007. Under this program, if the individual with the loan has worked a minimum of 10 years of full-time work (defined as a minimum of 30 hours per week) for a designated 501(c)(3) nonprofit organization or government entity (state, local, federal, or tribal) and makes all student loan payments for 120 months (10 years), then all remaining student loan debt is forgiven.

March 7, 2025, Executive Action Threatens PSLF Program

CPresident Trump seeks to limit PSLF eligibility for organizations his administration determines are engaged in “illegal activities,” and decrees that “individuals employed by organizations whose activities have a substantial illegal purpose shall not be eligible for public service loan forgiveness.” The order identifies several categories of activities that the administration believes should result in an organization being excluded from qualifying PSLF employment and, thus, from student loan forgiveness eligibility:

• “Aiding and abetting” violations in immigration law. Immigration and resettlement-related organization could be at risk.
• “Child abuse,” which the administration specifically defines as providing or supporting gender-affirming healthcare for transgender youth, potentially impacting LGBTQ+ organizations.
• “Engaging in a pattern of aiding and abetting illegal discrimination,” which could implicate civil rights organizations and nonprofits supporting DEI initiatives.

The executive action provides enormous latitude to the administration to determine which organizations are eligible, and which are not. Read the executive action here.

Why do nonprofits care?

This program offers an important benefit for recruiting staff into the nonprofit sector, competing with higher salaries offered in the private sector.  Under PSLF, a total of $78 billion of loans have been forgiven, aiding 1,069,000 borrowers with an average loan balance of $73,000.

Another option

Separate from PSLF, employers can now offer a pre-tax paycheck withholding applied toward a student loan, up to $5,250 per year. This benefit, alongside offerings like a 401(k) or 403(b) plan, allows employees to reduce short-term tax liability with long-term financial security benefits.