Trump Issues Executive Order That Would Disqualify Public Service Student Loan Forgiveness For People Engaging In Activities That Go Against His Agenda

Last November, I warned that President Donald Trump, once he took office, would make changes to the student loan program that would either increase monthly payments or make it more difficult to obtain loan forgiveness. On Friday, he issued an executive order that would impact the Public Service Loan Forgiveness (PSLF) program.

The PSLF program allows forgiveness of federal loans after 10 years of working in a public service job. This generally means working for the government, a charitable organization given 501(c)(3) tax-exempt status, or another nonprofit entity that engages in public service work. Private student loans are not eligible for the PSLF program.

The order states that the secretary of education must propose revisions to current regulations to ensure that borrowers working for organizations that engage that have a “substantial illegal purpose” will be ineligible for PLSF.   

While the order did not define what constitutes a “substantial illegal purpose,” it did specify five activities.

• Aiding or abetting violations of federal immigration laws
• Supporting terrorism or engaging in violence for the purpose of obstructing or influencing federal government policy
• Child abuse, including surgical castration or mutilation of children or trafficking of children to transgender sanctuary states for the purpose of emancipation from their parents
• Engaging in a pattern of aiding and abetting illegal discrimination
• Engaging in a pattern of violating state tort laws, including against trespassing, disorderly conduct, public nuisance, vandalism, and obstruction of highways

The above activities focus on Trump’s key issues such as illegal immigration; terrorism; eliminating diversity, equity, and inclusion programs; recognizing only males and females as legitimate genders and discouraging transgender influences on children; and violent rioting. This may lead many to believe that this is an ideology test.  

The order states also that the Secretary of Education will coordinate with the Secretary of Treasury as appropriate. While the order does not specify how they will coordinate, considering that the Treasury Department oversees the IRS, including its Exempt Organizations section, it may investigate nonprofit organizations that are suspected of engaging in the above activities and could revoke their 501(c)(3) status.

Lastly, the order seems to suggest that more changes could be on the way. It stated that the PSLF program creates perverse incentives that can increase the cost of tuition, load students in low-need majors with unsustainable debt, and push students into activist organizations operating as nonprofits, which Trump believes could have negative societal effects. This may suggest future executive orders or regulatory changes that could make obtaining forgiveness more difficult, possibly even going back to the days where 99% of PSLF loan applications were denied.

The executive order cannot be implemented immediately as it must go through the rule-making process. Also, legal challenges are likely, and a court will decide whether the executive order violates the First Amendment or has enough political or economic significance to require Congressional action.

Those who worked for organizations that might have engaged in the above forbidden activities could have their monthly PSLF payments disqualified. This can be particularly troublesome for those who have worked for these organizations for many years. Some of these people may be able to argue that they themselves did not engage in the forbidden activities even though their employer may have.

Some will have to consider going to another qualifying employer to maintain their PSLF position at least until Trump is no longer in office and his successor is willing to reverse his executive order. This is easier said than done as some will have to give up a job they enjoy doing. Or quitting could conflict with their values, principles, and their reputations. And some may have nowhere else to go.

This executive order is a sign of things to come. So how should borrowers enrolled in the PSLF program react? In general, they should be vigilant about making sure that they complied with all of the requirements for PSLF on the anticipation that the new management at the Department of Education (or what is left of it) will impose stricter compliance rules on payments and qualifying employment. Also, they should keep a very close eye on what the current Republican-controlled government does as there may be future executive orders, regulatory changes, or even a change in the law altogether.

Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at stevenchungatl@gmail.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.

The post Trump Issues Executive Order That Would Disqualify Public Service Student Loan Forgiveness For People Engaging In Activities That Go Against His Agenda appeared first on Above the Law.