Employees of some nonprofits get notified they don't qualify for student loan forgiveness program
Some nonprofit employees counting on the federal government’s Public Service Loan Forgiveness Program recently received word that they don’t qualify, for reasons that remain unclear.
The change might be related to an employer’s tax status. Part of the College Cost Reduction and Access Act of 2007, the PSLF program includes charitable nonprofit employers that under the Internal Revenue Code have 501(c)(3) status. PSLF program guidelines include other nonprofits that provide public service, but some, including the American Bar Association—which has 501(c)(6) status—were told earlier this year that they don’t qualify, although they received employer certification in previous years.
The U.S. Department of Education oversees the PSLF program, which is administered by FedLoan Servicing. Besides working for a 501(c)(3) or a nonprofit that provides specific services, those eligible for the program must work in public service for 10 years and make 120 qualifying loan payments after Oct. 1, 2007. Jobs with labor unions, partisan political organizations and for-profit groups do not qualify. The first forgiveness of loan balances is expected in October 2017.
“What I think is really interesting is that there is some interpretation necessary to determine which organizations qualify. There is some clear language in the statute and the regulation, but what we lack is a fair and transparent process,” says Heather Jarvis, a North Carolina lawyer who provides educational resources and training for student-loan borrowers.
Some American Civil Liberties Union offices also lost employer certification for the program, while others received various answers from the federal government.
Jocelyn Rosnick, an assistant policy director with the ACLU of Ohio, received an approval letter for the PSLF program in 2015. This year she received a reversal letter stating that her employer did not qualify. The matter was sent to the loan servicer’s compliance group. Rosnick says that when she called customer service to check on her status, she received various answers about why she received a revocation form, including that the ACLU did not provide a qualifying service and that they were a partisan organization.
The ACLU of Ohio pays employees out of its 501(c)(3) fund.
“If you’re a 501(c)(3), you actually don’t have to provide a qualifying service,” Rosnick says. She was one of four employees in the office who had their certification revoked. In May 2016, after a deputy director spoke with someone at the Department of Education, Rosnick received a letter that the ACLU of Ohio is a qualifying public service organization for the purpose of PSLF.
“The first forgiveness class isn’t until next year. I think until then, there aren’t going to be any established guidelines, and everything is a bit unknown,” says Rosnick, a 2012 graduate of Case Western Reserve University School of Law. She has more than $100,000 in student loans.
Trade groups that provide member services and have 501(c)(6) status, like the ABA, do not meet the public service definition, says Bruce E. Hopkins, a Kansas City, Missouri, lawyer who represents nonprofits.
“The 501(c)(3) entities operate for the benefit of the public, and the 501(c)(6)s do not. Rather, they primarily operate for the benefit of their members,” he says. “People who love 501(c)(6)s might take offense; they think what they’re doing collectively is important for the public. The fact is, when you look at each particular association, they principally operate for the benefit of their members.”
“It’s certainly a nonprofit, and there’s an aspect of public education that is occurring at the ABA,” she says.
The ABA has heard from multiple employees whose PSLF applications were rejected by the Department of Education. Also, the organization successfully lobbied against the program being significantly cut or eliminated this past winter, says Kenneth Goldsmith, the ABA’s senior legislative counsel and director for state legislation.
“ABA staff clearly qualifies for the federal Public Service Loan Forgiveness program, based on the public interest legal services and public education we provide,” says Jack L. Rives, executive director and chief operating officer of the ABA.“ We are aggressively seeking to restore our status fully and unconditionally as a qualified employer.”
Public education and direct legal services provided without costs are listed as PSLF qualifiers for employers without 501(c)(3) status. In a May 26 letter (PDF) to Ted Mitchell, the under secretary of education, Rives noted that the ABA Section of Legal Education and Admissions to the Bar “promotes uniformity and quality in professional education.” Also, the organization provides direct legal services in programs such as the South Texas Pro Bono Asylum Representation Project, known as ProBAR.
“These actions by the department lack any due process and are patently inconsistent with the governing law,” Rives wrote. “They have caused real harm to our workplace and our ability to attract and retain talent, as well as causing lost time and money for the borrowers directly affected. And at a very fundamental level, these actions are simply not fair.”
Representatives from the Department of Education and FedLoan Servicing were not available for comment at press time.