Exempt Organization Professors Comment on Proposed Public Service Loan Forgiveness Regulations

The Department of Education recently proposed regulations amending the regulations for the Public Service Loan Forgiveness (PSLF) program. The Department stated that the intent of the regulations is to “exclude any organization that engages in activities that have a substantial illegal purpose from being a qualifying employer for the purposes of the PSLF program.” Based on a March 7th Executive Order from President Trump, the Department further stated that it “based its approach in this matter, in part, on the so-called ‘illegality doctrine’ utilized when determining whether organizations qualify for tax-exempt status under Internal Revenue Code § 501(c)(3) (a requirement for non-governmental organizations to be considered a qualifying employer for the purposes of the PSLF program). The Department considered this doctrine because it is a tested approach taken by another executive agency to avoid subsidizing employers engaged in unlawful conduct.” (footnote omitted).

I joined a comment with twenty other exempt organizations professors to highlight that the proposed regulations both inaccurately describe the illegality doctrine and neglect the crucial procedural safeguards that accompany its application by the Internal Revenue Service. And we were far from alone in commenting on the proposed regulations, which attracted 13,988 comments according to regulations.gov.