The Issue

In 2007, President George W. Bush signed the bipartisan Public Service Loan Forgiveness (PSLF) program into law to encourage college graduates to pursue careers in service of the common good. Through the program, social workers, educators, researchers, public-interest lawyers, nurses, and museum curators working 10 years in the nonprofit sector can earn forgiveness on eligible student loans. The program forgives the remaining balance on borrowers’ direct loans after 120 monthly payments have been made under an accepted repayment plan while working full-time for a qualifying employer. Qualifying employers include U.S. federal, state, local, or tribal governments or 501(c)(3) nonprofit organizations.

Over the years, minor adjustments have been made to improve access and expand eligibility, ensuring more public servants can benefit. In October 2021, the U.S. Department of Education settled a lawsuit with the American Federation of Teachers (AFT), acknowledging and attempting to remedy various failures in the management of PSLF. The settlement provides a review of previously denied applications and gives program participants more information about qualifying for forgiveness. Listen to Independent Sector’s 2019 podcast episode with one of the lawyers who secured this victory.

On August 18, 2025, the U.S. Department of Education proposed a rule change that would allow it to exclude certain nonprofits from PSLF eligibility for having engaged in what the Department deems to be “substantial illegal activity” – a confusing classification based on a patchwork of inconsistent legal standards that opens the door to the political targeting of organizations. If the proposed rule is adopted, payments made while employed by such an organization would no longer count toward PSLF once the employer is disqualified – raising serious concerns for current borrowers.

On September 12, 2025, Independent Sector submitted a comment urging the Department of Education not to implement the proposed rule. Independent Sector supports efforts to maintain the integrity of PSLF, and we strongly oppose any attempt to exclude nonprofits based on their mission or the communities they serve. The law is clear: working for any 501(c)(3) organization is a PSLF-qualifying public service job. There is already a mechanism to respond if a nonprofit is violating the law – the IRS can revoke its 501(c)(3) status. Adopting a parallel process where the Department of Education selectively disqualifies organizations will create confusion and will undermine both the law and borrowers’ trust in the program.

What’s at Risk?

Public service professionals, like nonprofit employees, deliver services to the communities that need them the most and help uplift families across the nation.  By offering these professionals relief from their student loans, PSLF helps to close the wage gap between the nonprofit and private sectors.

Improving this program strengthens nonprofits’ ability to deliver high-impact programs that ensure healthy, thriving communities. It enables nonprofits to recruit and retain top talent, because our employees can have more confidence that their student debt will not hinder their long-term financial goals.

The proposed rule exceeds the authority that Congress gave the Department of Education to implement the PSLF program. Further, it serves to destabilize an already contentious landscape for public service professionals.

In enacting the PSLF program, all branches of government made a promise to these workers to forgive their debt after 10 years of service and consistent loan payments. It is essential that this program be protected and made easier to access, not harder, for the nonprofit workforce and other public service workers who have upheld their end of the bargain, made their required payments, and dedicated their careers to serving their communities.