Is Your Employer about to Cost You Forgiveness?
This tax clause changes everything.
A Silent Threat to Student Loan Forgiveness in the GOP Tax Bill
Massive PSLF Changes Could Threaten Forgiveness for 6 Million Borrowers. A significant threat to student loan forgiveness is quietly tucked into a new GOP-backed tax proposal for 2025. The bill includes a provision that would give the U.S. Treasury Secretary sweeping authority to unilaterally revoke a nonprofit organization's 501(c)(3) status if it is deemed to provide "material support" to terrorist activity. This provision could have dramatic consequences for the Public Service Loan Forgiveness (PSLF) program, a key path to debt relief for millions of nonprofit workers.
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Why This Matters: PSLF and Nonprofit Employment
To qualify for PSLF, borrowers must:
Work full-time for a government or 501(c)(3) nonprofit employer
Make 120 qualifying monthly payments under an income-driven repayment (IDR) plan
If an employer loses its nonprofit status, all of its employees become ineligible for PSLF — even if they are years into making qualifying payments. Under current law, the IRS oversees nonprofit status revocations, but this bill would bypass that process, centralizing the power in the hands of the Treasury Secretary without any checks and balances.
Who's At Risk? Millions of Borrowers Could Be Affected
According to 2022 data from the U.S. Bureau of Labor Statistics:
12.8 million Americans work at nonprofit organizations
75% of these are likely employed by 501(c)(3) institutions
TIAA data indicates that about 47% of these workers have student loan debt
That equates to approximately 6 million nonprofit employees with student loans who could lose PSLF eligibility if their employer's nonprofit status is revoked.
Targeted Institutions Already Under Fire
President Donald Trump has previously criticized prominent nonprofit universities like Harvard, Columbia, and the University of Pennsylvania. In 2025, his administration froze funding to these institutions over their response to campus protests related to Middle East conflict, and publicly suggested stripping their nonprofit status.
These institutions are massive PSLF-eligible employers. For example:
Harvard employs over 18,000 people
Penn and Columbia each have thousands of employees in public-facing roles
Revoking their nonprofit status would immediately disqualify their employees from PSLF, with no regard for how close those individuals may be to loan forgiveness.
Executive Orders Laying the Groundwork
In early 2025, President Trump signed an executive order calling for PSLF eligibility restrictions based on perceived support of anti-American or illegal activity. While that order didn’t impact tax status, it signaled a broader plan to politicize PSLF access. The current legislative proposal builds on that vision by granting the executive branch new powers to revoke eligibility through tax status changes.
This new authority could be used to:
Revoke PSLF access from groups that support immigration advocacy
Target organizations offering gender-affirming care
Restrict racial justice and environmental nonprofits
Potential Domino Effects Beyond PSLF
This legislation would destabilize PSLF, but the impact wouldn’t end there:
Nonprofits may self-censor to avoid Treasury scrutiny
Professional talent pipelines for education, healthcare, and social work could dry up
Trust in PSLF as a reliable program may erode, driving more workers into for-profit sectors
A Program Millions Depend On Is At Risk
The PSLF program was designed to help those serving the public — teachers, nurses, nonprofit staff, government employees. But with this one provision, up to 6 million borrowers could lose the very benefits they’ve been working toward for years.
Moving Forward: Stay Informed, Stay Engaged
The GOP tax bill is still making its way through the legislative process. No changes are final yet, but the implications are clear. Borrowers, nonprofit leaders, and advocates should:
Monitor the bill’s progress closely
Prepare to defend the integrity of PSLF
Contact representatives and voice concerns about this hidden threat
Bottom line: This isn’t just about taxes — it’s about the future of student loan forgiveness for millions of Americans who chose public service.