An under-the-radar effort to curtail civil society

How a low-profile loan program may be abused

For the last few months, nonprofit organizations and other parts of civil society have been facing a barrage of actions designed to intimidate and hobble any organization or institution that might serve as a check on abuses of power. (If you work at a nonprofit, you can find all our resources on these threats and how to be prepared here).

The latest move against civil society, however, comes through a program you might not even have heard of: the Department of Education’s Public Service Loan Forgiveness program. Like so many authoritarian tactics, it’s a seemingly technocratic change that would expand executive power and produce yet another way of suppressing dissent and labeling opposition as unlawful or illegitimate.

If successful, the effort would politicize the program, giving the administration a way to smear organizations it doesn’t like with claims of criminal behavior and punish them accordingly — all without ever having to involve a court.

The Public Service Loan Forgiveness program was designed as a politically neutral effort to bolster careers in service

The PSLF was established by Congress with broad bipartisan support and signed into law (by a Republican president) in 2007 with the goal of encouraging individuals to enter and remain in public service careers.

The program entitles certain individuals with federal direct student loans to work for public service employers such as local governments or charitable nonprofits and then eventually earn forgiveness of any outstanding balance on their loans. Under the statute that established the program, borrowers can work for any 501(c)3 organization and count that employment towards the requirements for earning loan forgiveness.

That’s it.

There are no additional political or ideological criteria that make organizations eligible or ineligible as employers under the program. Among the many eligible employers are faith groups, hospitals, social service providers, schools, law enforcement, the military, and government bodies at the federal, state, local, or tribal level.

But a few weeks ago, the Department of Education acted on an executive order from March and proposed new regulations governing PSLF employer eligibility. The new proposed rules would give the secretary of education unprecedented authority to determine that otherwise-eligible employers had engaged in activity with a “substantial illegal purpose” and kick those organizations out of the program. The first problem, of course, is that the secretary has no authority to do this. Congress did not actually delegate decision making over employer eligibility under the PSLF to the department at all.

The second problem is the proposed rules provide almost no due process. The administration could declare specific nonprofit organizations to be effectively criminal without actually having to prove it.

In most cases, there would be no requirement that a court make a determination of wrongdoing. The IRS wouldn’t even have to decide to strip an organization of its tax-exempt status. The education department could effectively just conduct its own inquiry and make a designation based on a “preponderance of the evidence” (a standard far lower than the one used in criminal court).

Under the proposed regulations, borrowers and employers are also given no way to appeal a decision removing them from the program. At best, an employer might be able to regain eligibility if they come to an agreement with the secretary on a “corrective action plan.” (This kind of governance by negotiation may sound familiar.)

But wait. There’s more.

The proposed regulations also list the categories of activity that would constitute a “substantial illegal purpose.” Interpreted by this administration in ways that are both expansive and contestable, they include (among others) “aiding and abetting” violations of immigration law, various activities related to medical care for transgender minors, discrimination, and conduct governed by state laws related to public protest.

When you think about all potentially illegal activity that a government might be concerned about, it’s actually a pretty underinclusive list. If this were really about ensuring participants in a federal program were operating in compliance with our nation’s laws, it seems unlikely that the requirement would be limited to the current administration’s policy priorities.

What’s more — there are already ways to hold nonprofits that really do engage in illegal activity accountable. There is an existing process for the IRS to revoke tax-exempt status, one with legal guardrails against political abuse.

The intent is clear: The proposed changes would politicize the program, giving the secretary of education the ability to disqualify employers whose work is disfavored by the administration. Staff at a nonprofit that was barred from the program could not continue to work there if they wished to remain eligible for eventual loan forgiveness. This would drain nonprofits and other PSLF employers of talent, effectively squeezing and neutralizing civil society.

This would also have obvious chilling effects, even for organizations not already penalized. Organizations couldn’t know for sure if doing lawful work in service of their mission would run afoul of the administration’s politics and cause them to lose eligibility and therefore their staff. Individuals may also steer clear of working for organizations they worry could be targeted and look instead to work for organizations favored by the current government in order to remain eligible for loan forgiveness.

All told, the proposal would turn the PSLF into another way that the government could punish independent organizations whose work it simply doesn’t like. With no due process and political but vague criteria, it is one more way to close off civic space and quash dissent.

These changes are not final and can still be rejected

This move may come in a technocratic form, but our system provides opportunities for anyone to make their voices heard on regulatory changes through the public comment period.

The public comment period for the proposed rules closes on September 17 — in just under a week. For those who want to learn more about the proposed rules or consider speaking up, the National Council of Nonprofits has a thorough explainer and a how-to guide for the comments process.

Read more: How to comment on the proposed changes.

All of this also shows why collective action is so important. The proposed changes aren’t really about if or how the Department of Education should do loan forgiveness. Regardless of whether or not you think the PSLF is based on good policy, access to existing public programs should never depend on whether you agree with the political program of any administration.

Sooner or later, every nonprofit in the United States — from faith groups to community organizations — may face a White House that is hostile to their mission. That means all of civil society has a stake in ensuring technical programs like the PSLF remain neutral and unpoliticized.