Trump Overhauls Loan Forgiveness, Sparks Sparks Fears of Political Target/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ President Trump plans changes to Public Service Loan Forgiveness that could exclude nonprofits aiding immigrants and transgender youth. Advocates warn this could turn debt relief into a political weapon. Proposed rules may force borrowers to choose between jobs and loan forgiveness.
Quick Look
- Program Affected: Public Service Loan Forgiveness (PSLF)
- Main Concern: Political targeting of nonprofits aiding immigrants, trans youth
- Potential Impact: Millions could lose loan forgiveness eligibility if employers disqualified
Trump’s Student Loan Forgiveness Overhaul Sparks Fears of Political Targeting
Deep Look
WASHINGTON (AP) — President Donald Trump is pushing to reshape the federal student loan forgiveness program, raising alarm that the changes could become a weapon for political retribution against organizations tied to immigrants and transgender youth.
At the heart of the controversy is the Public Service Loan Forgiveness (PSLF) program, which cancels remaining student debt for government workers and many nonprofit employees after 10 years of payments. The Education Department is preparing new rules that would exclude any organizations engaged in “illegal activities” from participating—a term critics say is dangerously broad and politically charged.
A draft proposal released by the department lists “illegal activities” tied to immigration violations, terrorism support, and transgender-related healthcare. The final decision about which organizations qualify would rest with the Education Secretary, creating concerns that the program could become a tool for punishing ideological opponents.
“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, who participated in early discussions on the proposed changes.
Major Impacts for Borrowers and Employers
Since its launch in 2007, PSLF has helped more than a million Americans—including teachers, nurses, and public service workers—wipe away student debt. The program was designed to encourage graduates to work in lower-paying public sector roles.
Currently, nonprofits qualify if they focus on services like public health, education, or legal aid. However, the proposed changes could exclude organizations providing services to immigrants or transgender youth. That includes nonprofits offering legal help to undocumented immigrants or grants for families seeking gender-affirming care for minors.
Trump’s March executive order accused the program of channeling taxpayer money into “activist organizations” that undermine national security. He demanded the removal of groups engaged in illegal activities, specifically naming those tied to immigration and transgender healthcare. He has frequently labeled pro-Palestinian groups as terrorist supporters.
Under the proposal, anyone employed by an organization ruled ineligible could lose credit toward loan forgiveness, forcing workers to choose between their careers and financial relief.
Hospitals, Cities, and Schools at Risk
The draft policy defines illegal activities to include “aiding or abetting” immigration law violations, supporting foreign terrorist organizations, and certain types of transgender healthcare for minors. It specifically targets hormone therapy and puberty blockers for individuals under 19.
Critics warn this could jeopardize entire hospital systems if one department provides such care. Similarly, cities refusing to cooperate with federal immigration enforcement could see all municipal employees cut off from PSLF benefits.
“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 negotiating panel. She fears the policy might also be wielded against universities that clash with Trump politically. “This unfortunately may allow them to further chase the undesirable institutions, in their view.”
The proposal allows the Education Department significant discretion to deem organizations ineligible, even without formal convictions or legal judgments. That opens the door, advocates say, to political interference and arbitrary decisions.
Worries About Workforce Shortages
Some fear the rule could worsen worker shortages in essential fields like healthcare and education.
Emeka Oguh, CEO of PeopleJoy, which helps employers manage student loan benefits, urged officials to narrowly target violations rather than punishing entire organizations. He noted confusion during negotiations over what specific actions might constitute disqualifying illegal activity.
“There was a lot of ambiguity there,” Oguh said.
Others worry about unintended consequences. A requirement for employers to certify they do not engage in illegal activities could trigger paperwork errors that strip PSLF eligibility from vast numbers of workers.
Next Steps for the Proposal
The Education Department says it aims to prevent taxpayer support for illegal conduct while safeguarding legitimate public service work. Officials insist they’re considering feedback and are open to adjusting the proposal.
The agency plans to release a formal draft for public comment in coming months, with any new rules expected to take effect in July 2026.
Last week, the department thanked negotiators for helping shape reforms that, in its words, “helped fulfill one of President Trump’s promises to ensure that PSLF does not subsidize organizations that are breaking the law.”
But for many borrowers and advocates, the fear remains that what started as a program to help public servants could become yet another front in America’s political battles.
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