Major Update For 6 Million Borrowers About Potential Loss Of Student Loan Forgiveness Eligibility

Student Loan Forgiveness Potentially In Jeopardy For Millions

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.

ForbesPublic Service Loan Forgiveness Under Threat: GOP Tax Bill Would Let Treasury Revoke Eligibility UnilaterallyBy Shahar Ziv

A Quiet Change In A Tax Bill Could Rock PSLF Eligiblity For Million

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.

How Many Are At Risk Of Losing PSLF Eligibility Within Student Loan Forgiveness And Repayment Program?

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.

• Health care and social assistance: 8.5 million nonprofit employees
• Education services (including universities): 2.1 million
• Remaining sectors (civic, arts, human services): 2.2 million

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.

Employees At Some Universities Already In The Crosshairs And At Risk Of Student Loan Forgiveness Loss

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.

ForbesTrump Signs PSLF Executive Order Limiting Eligibility: Who’s Affected?By Shahar Ziv

The Executive Order That Set The Stage For Student Loan Forgiveness Volatility

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 PSLF: Downstream Effects Across The Nonprofit Sector

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 Upshot For PSLF, Student Loan Forgiveness And Repayment

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.