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President Donald Trump has restructured his student loan cancellation program, with some fears turning into tools for political retaliation, targeting organizations that will serve immigrants and transgender youth.
Public Service Loan Exemptions allow government officials such as teachers and firefighters, as well as many people working for nonprofits, to cancel their student loans after 10 years of payment. The education department is preparing an overhaul to strip the organizations involved in “illegal conduct” of profits, leaving the final decision to the U.S. Secretary of Education. The draft proposal, released by the department, includes definitions of illegal activities centered around issues of immigration, terrorism and transgender.
Several supporters invited to consider the draft proposal raised concerns that would empower the department subjectively to determine whether the organization is engaged in something illegal. This is the power that can be used to remove the hospital system or the entire state government from the program.
“This is definitely a measure for me that it is politically motivated and perhaps used as a tool for political punishment,” said Betsy Mayotte, president of the Institute for Student Loan Advisors and one of his advocates, who was asked to review the policy as part of the rules-making process.
Plans can prevent many people from relieving loans
Over a million Americans have been cancelled through the program, including nurses, university staff and park rangers.
Congress created the program in 2007, encouraging university graduates to work in the public sector. There, salaries are often lower than for-profit organizations. The program promises to cancel all remaining debts if borrowers make 120 loans per month while working for government at any level. Currently, nonprofits are also eligible if they focus on certain areas such as public interest law, public health, and education.
The federal database of eligible nonprofits currently includes grants to transgender youth and their families, allowing you to travel to states that can maintain the gender of minors. It also includes those that provide legal services to immigrants regardless of their legal status.
Trump ordered a change in the program in March, declaring that he “misleading taxes to activist organisations” that harmed national security. He instructs the education sector to remove organizations that are linked to illegal activities, and independence of those working with immigrants and transgender youth, or supporting terrorism.
His plan could block a huge number of student loan borrowers from cancelling. People who work for unqualified employers are unable to make progress towards cancellations, effectively finding new jobs or forgetting to forgive a loan.
Hospitals, schools and nonprofits could be at risk
The definition of illegal practice proposals primarily reflects what Trump laid out. It includes “assistance or betting” that violates federal immigration laws and supports groups designated as foreign terrorist organizations. This list also includes violations of the Civil Rights Act of 1964. Trump officials have been called to eradicate diversity, equity and inclusion policies.
Also considered illegal is to “engage in chemical and surgical castration or amputation of a child who violates federal or state law.” This includes the use of hormone therapy or drugs that slows puberty. Children are defined as children under the age of 19.
It raises concerns that if a single department provides specific care to transgender youth, the entire hospital system could become ineligible. Similarly, the federal government could strip the interests of the entire city that limits cooperation with federal immigration officials.
“We could see the entire city and the entire private structure being targeted,” said Alyssa Dobson, director of financial aid at Slippery Rock University and a member of the Rules Creation Panel. She said it could also give the administration another tool to campaign against universities that violate the president’s politics.
“Unfortunately, they may be able to pursue further institutions that they don’t want,” she said.
When determining whether an employer should be deemed ineligible, the department’s proposal describes the court’s decision and other legal investigation results. But it leaves at least some room for subjectivity, giving the Secretary of Education the authority to remove the organisation without evidence of conviction or settlement.
The education department said only one negotiator opposed the proposal. Several negotiators on the Rules Creation Committee said they had problems with the proposal, but voted in favor of tweaking and felt the rules had improved.
A spokesperson for the Education Department said the agency “has an obligation to prevent illegal activities and to ensure that employers of the PSLF program are not involved in illegal activities.”
President Biden announced this morning that his administration has cancelled student debts for around 55,000 borrowers.
Advocates see ambiguity in their definition of illegal activities
Emeka Oguh, CEO of People Joy, a company that helps employers provide student loan relief, said the policy could exacerbate the shortage of doctors and nurses when used widely. A member of the panel, he encouraged the education department to follow individual hospital departments rather than the entire system, surgically using electricity.
Oguh said department officials cannot provide examples of organizations that may be known to be involved in illegal activities. When asked for details, authorities said that hospitals would not consider illegal to treat immigrants in the country unlawfully, he said. It was not so certain how we would handle teachers and schools who were considered DEIs and teachers and schools who taught teachers to schools.
“There was a lot of ambiguity there,” Og said.
Others raised concerns about provisions requiring employers to prove they are not engaged in illegal activities. Failure to accredit the organization can become ineligible and raises the risk that document issues can put the cancellation of a huge number of borrowers at risk.
The department said it was open to making changes based on the panel’s concerns. Ultimately, it is free to form the proposal as it pleases. The agency is currently preparing for formal proposals that will be published before the public comment period runs. It is expected to come into effect in July 2026.
Last week, the Education Department thanked experts and said it “helped them to meet one of President Trump’s promises to ensure that the PSLF does not subsidize law-breaking organizations.”
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