Policy Alert: Revising Eligibility for Public Service Student Loan Forgiveness

Action: Executive Order "Restoring Public Service Loan Forgiveness"

What it does: The order directs the US Secretary of Education to propose revisions to the definition of "public service" as defined in 34 C.F.R. 685.219 Public Service Loan Forgiveness Program, to exclude organizations that "engage in activities that have a substantial illegal purpose."

Key Insights

• Congress established the Public Service Loan Forgiveness Program (PSLF) in 2007 to encourage careers in public service such as becoming teachers, firefighters, social workers, or military service members, by forgiving loan balances of borrowers who make 10 years of payments on their student loans while working in public service.
• The Order alleges the program has been used to fund "radical agendas" and "pay pro-Palestinian and pro-Hamas activists and criminals." The executive action aims to restrict "loan forgiveness activities that advance illegal immigration, terrorism, child abuse [including medical procedures for transgender children], discrimination, and public disruptions." 
• The revisions would require the US Department of Education to follow a negotiated rulemaking process. The changes are likely to face legal challenges as well from student and other advocacy groups. During the President's first Administration, the Department faced a lawsuit due to the low approval rate of applications through the PSLF program. The case was eventually settled but application approvals remained low. The current Administration could repeat this strategy as an interim approach to the proposed goal.
• The Executive Order is also critical of the prior Administration's handling of the program. The Biden Administration sought to address previous "administrative errors" that limited loan forgiveness and waived student loans for more than 1 million borrowers through the Public Service Loan Forgiveness program.