Uncertainty Around Student Loan Forgiveness Program Worries Nonprofits
Some nonprofit employees are facing uncertainty over whether the Department of Education will continue to recognize their eligibility in a loan forgiveness program. It also raises issues for HR departments that have had employees participate in the program.
Concern is growing that the Department of Education (DOE) may retroactively refuse to honor loan forgiveness as part of the Public Service Loan Forgiveness program to participants who are employed by certain nonprofits.
The PSLF program, enacted in 2007, states that individuals who work in a public service job and make timely payments on their student loans for 10 years would have their debt forgiven. The American Bar Association filed a lawsuit last December after DOE informed several ABA lawyers and other nonprofit employees that they were no longer eligible for loan forgiveness through the program.
“We needed to hold the Department of Education accountable for the promises that it made to people, lawyers … who made the choice to dedicate their lives to public service,” ABA President Linda Klein said. DOE did not provide public notice that any eligibility requirements had changed, and in a legal filing said that any previous approval letters were not binding.
But now nonprofit employees who have had their eligibility rescinded—including the four plaintiffs who currently or formerly worked for ABA, the American Immigration Lawyers Association, and Vietnam Veterans of America—are concerned they can’t pay back their student loans.
“When you think about these lawyers who started their professional lives maybe carrying six figures of student debt, instead of choosing lucrative jobs where they could more quickly pay off their loans, they opted into public service relying on this program,” Klein said. “They relied on the promise made to them by the Congress and by the Department of Education that if they made their loan payments at this reduced rate for 10 years, then their loans would be forgiven. And then after … as many as 9 years, they get the rug pulled out from under them. Without warning, without explanation, with no published time period for comment, the Department of Education was changing their mind.”
As these employees lose their eligibility, they are faced with no choice but to find new jobs that can pay off their loans, leaving ABA and other nonprofit HR departments with a recruitment and retention challenge.
Klein shared that one lawyer working for ABA’s ProBAR Children’s Project, which provides legal-rights education for detained unaccompanied immigrant children and is funded by the Department of Justice, cited her loss of PSLF eligibility as the reason for leaving her position.
In addition, ABA now has to inform job applicants that some of its employees have lost their eligibility, causing candidates to decide to work elsewhere. In the past, ABA used the PSLF program as a recruitment tactic. Besides winning the lawsuit, Klein doesn’t think there is any solution for HR departments facing these challenges.
“The managers at the ABA are very concerned about our ability to continue to be competitive in hiring and retention in this very important work that lawyers that work for the ABA do,” she said.