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The Trump administration is moving forward on a plan to exclude certain nonprofits from a popular student loan forgiveness program if their work is deemed to have a “substantial illegal purpose” — a move that could prevent some teachers, doctors and other public employees from having federal loans canceled.
The new rules were finalized on Thursday education department The power to ban organizations from the Public Service Loan Forgiveness Program was expanded. The Trump administration says it is necessary to keep taxpayer money from being diverted from those who break the law. Critics say this makes the program a tool of political vendetta.
The policy, which took effect in July, is primarily targeted at organizations that work with immigrants and transgender youth.
It gives the Secretary of Education the power to exclude groups from the program if they engage in activities including child trafficking or “chemical castration,” illegal immigration, and supporting terrorist organizations. “Chemical castration” is defined as the use of hormone therapy or medications that delay puberty – common in gender-affirming care for transgender children or teens.
This is a major redesign of a program that has canceled more than $1 million in loans. Americans and was created by Congress Moving more college graduates into low-wage public sector jobs in 2007. The Trump administration has not yet identified the specific groups it wants to target, but it estimates fewer than 10 will be banned per year.
“Illegal activity by its very nature is contrary to the public good,” the Education Department wrote in a fact sheet. “Congress focuses on public service, and the Trump Administration will not direct taxpayer dollars from hardworking Americans to organizations that are breaking the law.”
The program has rewarded a wide range of public service careers
The program promises to cancel federal student loans for government employees and many nonprofit workers after making 10 years of payments. It has long been open to government employees, teachers, firefighters and employees of public hospitals. The eligibility rules set by Congress mostly focus on the tax status of nonprofits and their scope of work.
Workers of organizations of all political groups have benefited from this. Yet the march action demanded new boundaries, the President donald trump It said it “misdirected tax dollars into activist organizations that not only fail to serve the public interest, but actually harm our national security and American values, sometimes in criminal ways.”
A central concern of critics is that the department is giving itself wide latitude to determine whether an organization’s work should be considered to have a “substantial illegal purpose”.
employers State and local governments as well as nonprofits can be locked out of the program if a state or federal court rules against them or if they agree to a legal settlement that involves pleading guilty. It appears that, for example, providing gender-affirming care in the 27 states that outlaw it could be grounds for expulsion.
Even without a legal finding, the Secretary of Education would be able to independently determine whether an organization should be banned. The Secretary will consider whether the “preponderance of the evidence” is against the employer.
In drafting the rule, the department dismissed concerns from many who said the standard of proof was too low.
“This ensures that decisions are based on reality, not speculation, and allows the Department to act quickly to protect both borrowers and taxpayers,” federal officials wrote.
Critics see opportunity to take decisions based on ideology
Among those opposing the proposal were major organizations in higher education, health care, and the legal professions. In public comments submitted to the department, many called it an illegal move and said it would undermine incentives that have helped address job shortages in high-demand sectors.
The American Bar Association said this could lead to a decline in the ranks of public defenders and those involved in public interest law. Thousands of people would lose access to representation, the association said, “simply because those lawyers’ jobs were deemed politically unfavorable by the Secretary of State.”
The National Council of Nonprofits said the policy would allow a future administration of any political party to change the eligibility rules “based on their preferences or ideology.”
Rep. Tim Walberg, R-Mich., chairman of the House Education and Workforce Committee, said the overhaul would prevent taxpayers from covering debt relief for employees of “radical organizations that violate state and federal laws.” “Aiding illegal immigration, supporting terrorism, or promoting child exploitation through gender reassignment is not ‘public service,'” Wahlberg said in a statement.
According to the new rules, employers can be approved only for activities occurring on or after July 1, 2026. They will be informed and given the opportunity to review the evidence and respond to the Department’s findings. People barred from the program may reapply for eligibility after 10 years or rejoin sooner if they follow a “corrective action plan” approved by the Secretary.
Department documents indicate that depending on the circumstances, a single violation of the law may or may not be enough to sanction an employer. Not all organizations that break the law have a “substantial illegal purpose,” the agency said, and it ultimately depends on the secretary’s analysis of the evidence.
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