These 5 Groups Could Be Denied Student Loan Forgiveness Under Trump Rules

As the Trump administration moves forward to create new rules that could significantly narrow eligibility for a popular federal student loan forgiveness program, millions of borrowers could wind up getting denied relief.

Last week, the Department of Education announced that it was initiating a formal rulemaking process, in part to begin drafting regulations to put President Donald Trump’s recent executive order targeting Public Service Loan Forgiveness into effect. PSLF offers federal student loan forgiveness to borrowers who work for nonprofit or government employers for at least 10 years while making payments on their loans under qualifying plans. When Congress enacted PSLF in 2007 under President George W. Bush, lawmakers placed few restrictions on organizational eligibility – nearly any 501(c)(3) nonprofit or public organizations qualify.

But President Trump’s executive order, and the Education Department’s recent moves to implement that order through rulemaking, could upend PSLF and deny relief to broad cohorts of borrowers. Advocates and legal experts have warned that such attempts to restrict student loan forgiveness under PSLF are likely illegal. But that doesn’t mean the administration isn’t going to try, anyway. Here’s what borrowers should know.

What Trump’s PSLF Order Says About Restricting Student Loan Forgiveness

Trump argued (without evidence) in his executive order issued in March that the PSLF program was benefiting organizations that were engaging in unlawful or improper activities, at taxpayer expense.

“The PSLF Program has misdirected tax dollars into activist organizations that not only fail to serve the public interest, but actually harm our national security and American values, sometimes through criminal means,” said Trump in the order. The order did not provide any specific examples of these allegations.

“The PSLF Program also creates perverse incentives that can increase the cost of tuition, can load students in low-need majors with unsustainable debt,” continues the order, “and may push students into organizations that hide under the umbrella of a non-profit designation and degrade our national interest, thus requiring additional Federal funding to correct the negative societal effects caused by these organizations’ federally subsidized wrongdoing.”

How Many Groups Could Be Disqualified From Student Loan Forgiveness Under New Trump Rules

The order goes on to direct the Department of Education to create new regulations restricting student loan forgiveness eligibility under PSLF for organizations that engage in what President Trump says are improper or unlawful activities. The department initiated that process last week.

But borrower advocacy groups have warned that the wording of Trump’s order is so broad and vague that it could impact many organizations, and essentially serve as basis for the Department of Education to disqualify millions of borrowers from student loan forgiveness under PSLF simply because the administration disagrees with an organization’s mission or activities. Here’s a breakdown.

Restricting Student Loan Forgiveness Under PSLF Based On Immigration Activities

President Trump says student loan forgiveness under PSLF should be cut off for organizations that are “aiding or abetting violations of 8 U.S.C. 1325 or other Federal immigration laws.” This could be broadly read to include any nonprofit legal or advocacy organizations that provide direct representation to immigrants in deportation proceedings, or advocate for policies favorable for immigrant groups.

Taken further, this provision of the order could even be read to apply to so-called sanctuary cities and states where state and municipal law enforcement entities do not actively cooperate with federal immigration enforcement. Because the PSLF order targets organizations, not individuals, that means that anyone employed for such a state or city – such as government workers, public school teachers, public health officials, police officers, firefighters, and first responders – could be denied student loan forgiveness under PSLF, even if their jobs have nothing to do with immigration.

Restricting Student Loan Forgiveness Under PSLF Based On ‘Terrorism’ And ‘Violence’

The second prong identified in President Trump’s PSLF order would disqualify organizations from being eligible for student loan forgiveness under the program if they are “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.”

It might seem like a no-brainer that people engaging in violence and terrorism shouldn’t qualify for student loan forgiveness under PSLF. But the potential problem here, as with much of the order, is that it’s the organizations that are targeted for disqualification, and the broad and vague language could sweep up many groups. For example, legal groups and organizations that support peaceful protests against government policy – something that is protected under the First Amendment of the U.S. constitution – could become ineligible for student loan forgiveness under PSLF if any violence occurs at a protest, even if it is isolated and has nothing to do with the organization or its members, or is instigated by other groups or external elements. This provision may specifically be used to target nonprofit and public colleges and universities that have allowed pro-Palestinian protests, even if there is no violence and no violent rhetoric, because the administration could decide to broadly interpret such protests as “supporting terrorism.”

Restricting Student Loan Forgiveness Under PSLF Based On ‘Child Abuse’

The third prong of Trump’s order on PSLF would restrict student loan forgiveness eligibility for organizations that support or engage in what it calls “child abuse.” But the order specifically defines “child abuse” as “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.”

This could be read as targeting organizations that support providing gender affirming healthcare to minors, something that many states, nonprofit LGBTQ organizations, and nonprofit hospitals and healthcare facilities offer or help facilitate. Again, because the order targets organizations and not individual student loan borrowers, anyone working at an organization the Trump administration determines is supporting transgender youth could be cut off from student loan forgiveness under PSLF. This could be broadly read to include employees of any Democratic-led state or city that offers transgender nondiscrimination protections in healthcare (even if their jobs have nothing to do with healthcare, like teachers, law enforcement, and state park rangers) as well as employees of any healthcare facility that provides gender affirming care to minors (including nurses, doctors, medical technicians, and any other healthcare worker employed by such a facility, even if they do not specifically provide healthcare services to children).

Restricting Student Loan Forgiveness Under PSLF For ‘Illegal Discrimination’

President Trump also wants to restrict student loan forgiveness under PSLF for organizations “engaging in a pattern of aiding and abetting illegal discrimination.” This isn’t defined in the order, but some have read this to mean organizations that continue to utilize DEI initiatives. The administation has already targeted cities, states, and even private firms for what it characterizes as “illegal discrimination” through DEI initiatives.

“The E.E.O.C. is prepared to root out discrimination anywhere it may rear its head, including in our nation’s elite law firms,” said Andrea R. Lucas, acting chair of the federal Equal Employment Opportunity Commission in a statement last month.

Organizations that continue to use DEI initiatives could be targeted for disqualification from student loan forgiveness under PSLF through Trump’s order. For example, New York state informed the Trump administration last week that they will not comply with demands to end DEI initiatives.

“We understand that the current administration seeks to censor anything it deems ‘diversity, equity & inclusion,’” said Daniel Morton-Bentley, counsel and deputy commissioner of the New York department of education in a letter to its federal counterpart. “But there are no federal or state laws prohibiting the principles of DEI.”

If the Trump administration chooses to punish all of New York state over this, it could have profound implications by cutting off any state or municipal employee from student loan forgiveness under PSLF. This would include not only hundreds of thousands of state and city government agency employees but also teachers, counselors, firefighters, police officers, nurses, and more.

Restricting Student Loan Forgiveness Under PSLF Based On Violating State Laws

The final prong in Trump’s order restricting student loan forgiveness under PSLF would limit relief for organizations “engaging in a pattern of violating State tort laws, including laws against trespassing, disorderly conduct, public nuisance, vandalism, and obstruction of highways.” This could be read as a catch-all for any organizations that support or directly organize protests, even if they are entirely peaceful and protected under the First Amendment.

What Borrowers Should Know About Limiting Student Loan Forgiveness Under PSLF

Advocacy organizations and legal observers have argued that Trump’s directive to limit student loan forgiveness under PSLF is likely illegal. The PSLF statute passed by Congress and signed into law by President George W. Bush in 2007 does not allow a president or the Department of Education to restrict PSLF eligibility to an otherwise-qualifying organization based on its activities. In addition, penalizing organizations based on their activities, mission, or associations could be construed as an unlawful restriction of speech or association under the First Amendment of the U.S. Constitution.

Trump’s PSLF executive order is “blatantly illegal and an all-out weaponization of debt intended to silence speech that does not align with President Trump’s MAGA agenda,” said Mike Pierce, Executive Director of the Student Borrower Protection Center, in a statement last month. “Teachers, nurses, servicemembers and other public service workers deserve better than to be used as pawns in Donald Trump’s radical right-wing political project to destroy civil society. This will raise costs for working people while doing nothing to make America safer or healthier.”

The American Federation of Teachers, a national labor union, tacitly threatened to sue the Trump administration if it follows through and restricts PSLF eligibility. “PSLF is based on the idea that borrowers who make 10 years of repayments, and who often forgo higher wages in the private sector, can avoid a lifelong debt sentence,” said Randi Weingarten, AFT President, in March. “We sued Betsy DeVos and rogue loan servicers for their failure to administer the program—and we won. This latest assault on borrowers’ livelihoods is a cruel attempt to finish the demolition job that DeVos started.” The AFT, which is now leading a new lawsuit against the Trump administration for shutting down income-driven repayment last month, “won’t stop fighting,” she said.

For now, these new restrictions on student loan forgiveness under PSLF are not in effect. The Department of Education initiated negotiated rulemaking last week, a process to create new regulations that will likely take at least a year before any changes can be made. If the department follows through and implements President Trump’s order, it appears increasingly likely that there will be legal challenges. But this is just one of several ways the Trump administration is targeting the PSLF program – so borrowers on track for loan forgiveness must continue to remain vigilant.