DOE proposes New Rule on PSLF

The U.S. Department of Education proposed a new rule on August 18 to limit which charitable nonprofits qualify as eligible employers under the Public Service Loan Forgiveness program (PSLF). It is the considered opinion of National Council of Nonprofits, Independent Sector and NAO that this rule is unlawful.

PSLF is a bipartisan program that provides federal student loan forgiveness to individuals who work full time in public service jobs and make eligible payments for at least ten years. Because nonprofits do public benefit work, these rules have always included charitable nonprofits. With nonprofits making up nearly 10% of the U.S. workforce, they are the second-largest category of eligible employers after government agencies.

Nonprofits and the public at large now have 30 days to submit comments opposing the proposed overhaul of PSLF. The deadline to submit is September 17, 2025.

NAO joins the National Council of Nonprofits and Independent Sector urging all nonprofits and advocates to submit public comments. Click here to submit a comment.

On August 28th, President Trump sent a memorandum to the Attorney General directing the U.S. Department of Justice (DOJ) “in consultation with the heads of executive departments and agencies, to investigate whether Federal grant funds are being used to illegally support lobbying activities (See, 31 U.S.C. 1352) and to take appropriate enforcement action.” The memorandum alleges that “the possible use of Federal grants as slush funds for political and legislative advocacy raises serious legal concerns.”

President Trump’s memorandum appears to misinterpret the relevant federal statute. In fact, federal law does not prohibit nonprofits (or businesses) that receive federal grants, contracts, or cooperative agreements from lobbying. In 1995, a member of Congress tried to get that type of broad prohibition on lobbying enacted into law, but nonprofits were successful in advocating against it. Instead, the statute referenced in that sentence of President Trump’s memorandum (often known as the Byrd Amendment) merely prohibits nonprofits and businesses that receive federal grants, contracts, or cooperative agreements from using these federal funds to influence other federal funding decisions. Nothing in federal law prohibits federally-funded nonprofits from policy advocacy at the federal level or from using other revenue sources to lobby Congress or federal agencies for appropriations or for the awarding, renewal, extension, or amendment of a federal grant, contract, or cooperative agreement.

The memorandum directs the Attorney General to report to the President on the results of investigations into lobbying activities by federal grant recipients in 180 days. It is unclear what, if any, enforcement actions federal agencies may attempt to take against nonprofits that receive federal grants and are engaged in lobbying activities.