Are You Sure Your Non-Profit Job Qualifies for Loan Forgiveness?

The Public Service Loan Forgiveness (PSLF) program can be a good deal for attorneys. Work full time for the government or a qualifying non-profit for ten years and make 120 consecutive payments on a qualifying plan, and the rest of your federal loans are wiped out.

Here’s the problem: while we all know what constitutes a government job, things get a little fuzzier when it comes to non-profits. 501(c)(3) non-profits are covered, as are some non-501(c)(3) non-profit entities that provide “qualifying services.” Those qualifying services include public interest legal services and public education, both of which are relevant for attorneys hoping to fall under the program. And here’s where things have gotten complicated.

Recently, the Department of Education has told the American Bar Association, the American Immigration Lawyers Association, and some, but not all, American Civil Liberties Union offices, that they are not qualifying non-profits for purposes of loan forgiveness. The reasons are different for each.

For the ABA, they aren’t entirely sure why they do not qualify.

“No one at the Department of Education has been able to provide any justification for the unilateral policy change, which is especially bothersome because it’s to be applied retroactively,” says Jack L. Rives, executive director and chief operating officer of the ABA. “We are aggressively seeking to restore our status as intended by the law—fully and unconditionally as a qualified employer.”

For the AILA, the Department of Education decided that the people that work for the AILA do not provide public interest law services but the member attorneys that work with the AILA provide public interest law services. The AILA tried to get back under the umbrella of loan forgiveness by saying that they provide public education, but the Department of Education did not like that any better.

“Our research shows that AILA is a professional bar association primarily engaged in advocacy and providing news and commentary to its members and to the public in general,” the letter states. “For PSLF purposes, the Department considers ‘public education services’ to be services that provide educational enrichment directly to students and their families in a school, or school-like setting.”

That seems like an awfully narrow definition of “public education.” To add insult to injury: back in 2012, the Department of Education actually did tell the AILA that their employees qualified.

If the AILA situation seems complicated, it is much worse for employees of the ACLU.

Some American Civil Liberties Union offices also lost employer certification for the program, while others received various answers from the federal government. Decisions tended to be based on the tax status of which fund paid them, and some employees paid from an office’s 501(c)(4) funds were told their employer did not qualify. Groups with 501(c)(4) status are traditionally social welfare organizations, and some ACLU employees found to be ineligible for the PSLF program engaged in lobbying work.

So – if you work for the ACLU and are paid from 501(c)(4) funds, you may not qualify for loan forgiveness. If you work for the ACLU and are paid from 501(c)(3) funds, you may qualify. Perfectly clear, isn’t it?

The obvious problem here is that some recent law school graduates may have specifically sought public interest law work in part because of the option for loan forgiveness. Having the status of your employment be ever-shifting is a huge problem. The usual advice to a young graduate would be, of course, to be proactive: make sure you find out from your employer and the Department of Education whether your employment qualifies. However, that advice doesn’t help the graduate who starts a job—such as one at the AILA—where your job qualifies when you take the job, but at some future date does not. Hopefully the Department of Education will get their act together on this issue and provide some long-lasting clarification, but at this point it doesn’t look good.

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