Members of the U.S. Senate and House of Representatives have introduced legislation to negate a recent negotiated rulemaking of the Department of Education. Announced last fall, the rule’s stated purpose was to “prevent taxpayer-funded PSLF benefits from being improperly provided to individuals who are employed by organizations that engage in activities that have a substantial illegal purpose.” This would keep individuals who work for such organizations from meeting the “qualifying employment” criterion for PSLF, which says that they have to work for a government, non-profit, or other public service organization. Advocates, however, are concerned that the rule is too vague and could be used to target certain non-profits for ideological reasons—such as providing gender-affirming care for minors—rather than legal ones. This legislation would revoke the rule, preventing ED from disqualifying borrowers for PSLF as long as they meet the existing requirements.
One of the central tenets of this legislation is that this rule isn’t sustainable: it makes the PSLF “program vulnerable to shifting political priorities under any future administration” by granting “overly broad and subjective discretion to the Department of Education, by permitting disqualification of employers deemed to have a ‘substantial illegal purpose’—an undefined and subjective standard that invites arbitrary and inconsistent enforcement.” In enacting the rule, ED stated that they needed to make sure that organizations that shouldn’t qualify don’t. They incorporated the IRS’s “illegality doctrine,” which says that an organization largely engaged in illegal activity shouldn’t be able to qualify for non-profit status. The irony, however, is that the Department is going around the IRS—which awards non-profit status—to determine which non-profits it deems have a “substantial illegal purpose” and disqualify their employees from PSLF. In other words, with this new definition of qualifying employment, ED would hold the power to disqualify particular unpopular employers from PSLF without having to question their non-profit status.
Beyond challenging the “overly broad and subjective discretion to the Department of Education,” the legislation challenges the rule because it targets “marginalized communities and the nonprofits that serve them [and will] discourage public service careers and weaken the nonprofit workforce.” The bill doesn’t currently have bipartisan support, so it’s unlikely to pass, but it should draw attention to the problems with the rule itself. Further, in addition to existing lawsuits from coalitions of states and cities, more lawsuits are expected to be filed should the legislation fail.
If you have concerns about how this rule, this legislation, or any other potential changes to PSLF could impact you, give us a call. We can help you sift through the legalese and keep up-to-date with the latest policy changes.
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