What is the issue?

Congress established the 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.

Why do nonprofits care?

This program offers an important benefit for recruiting staff into the nonprofit sector. It allows nonprofits to compete with higher salaries offered in the private sector. 

What is the current situation?

In April 2024, President Biden announced plans to allow the Department of Education to use data on hand to identify borrowers otherwise eligible for Public Service Loan Forgiveness (PSLF) from their student loan debt without requiring them to apply for the program. The Administration expected this action to cancel debt for approximately two million borrowers nationwide. This followed his February 2024 announcement that another 78,000 borrowers who made loan payments and worked in the nonprofit sector or for federal, state, local, or tribal governments for at least ten years had their remaining student debt balances forgiven under the PSLF. An additional 380,000 workers two or fewer years away from reaching ten years of service were notified to continue their work toward the ten-year mark. Unfortunately, in June 2024, a federal judge placed a temporary restraining order prohibiting the Biden Administration from continuing its April plan. On October 3 a second federal judge released the temporary restraining order, and just one day later a third federal judge reimposed it.

In December 2024, President Biden announced the approval of $4.3 billion in additional student loan relief for 55,000 borrowers, bringing the total loan forgiveness by the Biden Administration under PSLF to $78 billion for approximately one million Americans. The loan reduction was due to administrative changes implemented to correct prior errors in the program, which caused borrowers to owe more than they were legally obligated.

Are there threats on the horizon?

Yes, from time to time, various members of Congress have tried to shut down the program, primarily through the congressional appropriations process, where funds could be cut off or “zeroed out.” And there will continue to be threats of potential litigation.

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.