Student loan cancellation program could become Trump retribution tool,
some advocates fear
[July 08, 2025]
By COLLIN BINKLEY
WASHINGTON (AP) — President Donald Trump is reshaping a student loan
cancellation program into what some fear will become a tool for
political retribution, taking aim at organizations that serve immigrants
and transgender youth.
Public Service Loan Forgiveness allows government employees, such as
teachers and firefighters, plus many who work for nonprofits, to have
their student loans canceled after they've made payments for 10 years.
The Education Department is preparing an overhaul that would strip the
benefit from organizations involved in “illegal activities," with the
final determination left up to the U.S. education secretary. A draft
proposal released by the department includes definitions of illegal
activity that center on immigration, terrorism and transgender issues.
Several advocates invited to weigh in on the draft proposal raised
concerns it would give the department subjective authority to decide if
an organization is engaged in anything illegal — a power that could be
used to remove entire hospital systems or state governments from the
program.
“That’s definitely an indicator for me that this is politically
motivated and perhaps will be used as a tool for political punishment,”
said Betsy Mayotte, president of the Institute of Student Loan Advisors
and one of the advocates asked to review the policy as part of a
rulemaking process.
Plan could block many from loan relief
More than 1 million Americans have had loans canceled through the
program, including nurses, college staffers and park rangers.
Congress created the program in 2007 to encourage college graduates to
work in the public sector, where salaries are often lower than at
for-profit companies. The program promises to cancel all remaining debt
after borrowers make 120 monthly loan payments while working for any
level of government. Currently, nonprofits also are eligible if they
focus on certain areas including public interest law, public health or
education.
A federal database of eligible nonprofits currently includes some that
provide grants to transgender youth and their families so they can
travel to states that permit gender-affirming care for minors. It also
includes some that provide legal services to immigrants regardless of
their legal status.
Trump ordered changes to the program in March, declaring it had
“misdirected tax dollars into activist organizations” that harm national
security. He directed the Education Department to remove organizations
tied to illegal activities, singling out those that work with immigrants
or transgender youth or those that support terrorism — a label he often
applies to pro-Palestinian activists.
His plan has the potential to block huge numbers of student loan
borrowers from cancellation. Those who work for an ineligible employer
would no longer be able to make progress toward cancellation,
effectively forcing them to find a new job or forgo loan forgiveness.
Hospitals, schools, and nonprofits could be at risk
The proposal's definitions of illegal activity largely mirror those laid
out by Trump. They include “aiding or abetting" in the violation of
federal immigration law, and supporting any group designated as a
foreign terrorist organization. Also on the list are violations of the
Civil Rights Act of 1964, a law Trump officials have invoked to root out
diversity, equity and inclusion policies.
Also considered illegal is “engaging in the chemical and surgical
castration or mutilation of children in violation of Federal or State
law.” It says that includes the use of hormone therapy or drugs that
delay puberty. It defines children as those under 19.
[to top of second column]
|
President Donald Trump walks toward the media to speak with them
before boarding Air Force One, at Morristown Municipal Airport in
Morristown, N.J., Sunday, July 6, 2025, en route to Washington after
a weekend in New Jersey. (AP Photo/Jacquelyn Martin)
It raises concerns that entire hospital systems could become
ineligible if a single department provides certain care to
transgender youth. Likewise, the federal government could
potentially strip the benefit from entire cities that limit
cooperation with federal immigration officials.
“I could see entire cities and entire civil structures being
targeted," said Alyssa Dobson, financial aid director at Slippery
Rock University and a member of the rulemaking panel. It could also
give the administration another tool in its campaign against
universities that run afoul of the president's politics, she said.
“This unfortunately may allow them to further chase the undesirable
institutions, in their view,” she said.
When determining if an employer should be deemed ineligible, the
department's proposal would take into account court judgments and
other legal findings. But it leaves room for at least some degree of
subjectivity, giving the education secretary the authority to
exclude organizations without proof of a conviction or settlement.
Only one negotiator opposed the proposal, the Education Department
noted. Several negotiators on the rulemaking panel said they took
issue with the proposal, but voted in favor of tweaks they felt
improved the rule.
An Education Department spokesperson said the agency “has an
obligation to prevent unlawful conduct and ensure that employers in
the PSLF program are not complicit in illegal activities.”
Advocates see ambiguity in the definition of illegal activity
If used widely, the policy could worsen shortages of doctors and
nurses, said Emeka Oguh, CEO of PeopleJoy, a company that helps
employers provide student loan relief. A member of the panel, he
encouraged the Education Department to use the power surgically,
going after individual hospital divisions rather than systems as a
whole.
Oguh said department officials were unable to provide examples of
organizations that might be found to be involved in illegal
activities. When pressed for detail, officials said it would not be
considered illegal for a hospital to treat an immigrant in the
country illegally, he said. Less certain was how the department
would handle teachers or schools teaching lessons considered DEI.
“There was a lot of ambiguity there,” Oguh said.
Some others raised concerns with a provision that requires employers
to certify they do not engage in illegal activities. Failure to
certify could also render an organization ineligible, raising the
risk that paperwork problems could jeopardize cancellation for huge
numbers of borrowers.
The department said it's open to making changes based on the panel's
concerns. Ultimately, it’s free to shape the proposal as it pleases.
The agency is now preparing a formal proposal that will undergo a
public comment period before it's finalized. It would be expected to
take effect in July 2026.
Last week, the Education Department thanked the experts and said
they “helped fulfill one of President Trump’s promises to ensure
that PSLF does not subsidize organizations that are breaking the
law.”
All contents © copyright 2025 Associated Press. All rights reserved |
