In the final entry in our series on executive orders and administrative actions that have affected nonprofit organizations this year we will be discussing the governments Public Service Loan Forgiveness program. This is arguably the most impactful of all of the actions conducted by the current administration on nonprofit organizations.
President Trump’s March 7, 2025, Executive Order 14235, Restoring Public Service Loan Forgiveness sets a new stage for nonprofits reliant on the Public Service Loan Forgiveness (PSLF) program. While framed as a correction of “abuse” in prior administrations, the order’s expansive exclusion criteria could dramatically reshape the nonprofit landscape.
What the Order Directs
The order instructs the Secretary of Education — in coordination with Treasury — to redefine “public service” such that employees at organizations with a “substantial illegal purpose” are disqualified from PSLF eligibility.
. The scope is broad, including activities such as:
- Aiding or abetting illegal immigration
- Supporting terrorism
- Child trafficking or gender-related medical activities among minors
- Illegal discrimination
- Certain civil-disobedience acts deemed disruptive to public order
While the order doesn’t automatically disqualify any group, it sets the stage for sweeping regulatory changes via negotiated rule-making — a process that could drastically narrow nonprofit access to PSLF over time.
Why Nonprofits Must Pay Attention
Nonprofit employers have relied on PSLF to attract and retain talent in public service roles. According to the National Council of Nonprofits, the program has been pivotal in maintaining staff in lower-paying yet socially vital sectors like education, healthcare, and social services.
Under the new order, organizations engaged in services to immigrants, transgender youth, or civil rights advocacy could be pushed out of PSLF eligibility. Lathrop GPM aptly points out that being labeled with a “substantial illegal purpose” may also trigger IRS scrutiny and risk tax-exempt status — even for legally operating 501(c)(3) entities.
Human Impacts and Legal Backlash
For many public servants, PSLF isn’t just a perk — it’s a life-altering commitment. Borrowers have built careers around this promise only to see it jeopardized.
Similarly, other professionals with only a handful of qualifying payments remaining face uncertainty amid potential rule changes.
At least one nonprofit, Legal Aid DC, has formally requested that any rule revisions avoid retroactive impact, emphasize protection for legal services to marginalized groups, and refrain from violating Department of Education authority.
Strategic Takeaways for Nonprofits
- Conduct risk assessments. Evaluate whether any aspect of your operations could fall under the order’s broad exclusions — particularly immigration support, gender-affirming care, civil-rights advocacy, or protest-related activities.
- Enhance documentation and compliance protocols. Strengthen record-keeping and retention practices to prepare for possible audits tied to PSLF eligibility or nonprofit status.
- Engage with legal counsel. Early guidance can help shape organizational policies and response strategies if your nonprofit is targeted.
- Participate in rule-making. Submit comments during negotiated rule-making and coalition with other nonprofits to preserve equitable access to PSLF.
Final Word
At its core, the PSLF program is a bipartisan commitment to bolstering public service by alleviating student debt for those who commit a decade of their careers to it
But President Trump’s executive order, cloaked in national-security rhetoric, threatens to dismantle that promise for nonprofits engaged in socially transformative work. The breadth of its language ensures that the real struggle is only beginning — and the nonprofit sector must prepare now to defend both its mission and the people who power it.